Investing During Retirement – What I Do.

Having heard no nays, here it comes.

I think it is important for people, if they are investors, to have goals.  My goal is to generate a reliable and increasing income stream from financially strong companies that have a history of increasing their dividends each year.  I am a dividend growth investor.

There, that is the easy part.  Now, what do I mean by that?  I look for companies that pay at least 150% of the average dividend for S&P 500 companies.  That is about 2% now, so I am looking for a dividend yield of about 3% or higher at the time I purchase the stock.  By financially strong I generally look at the Morningstar credit rating or the S&P bond rating.  I want companies rated at least BBB+, and most of the companies I hold are higher than that.  That is not all I look at, of course, but I am going to avoid the details of the additional research I do when making a decision about whether to invest in a particular company.

What level of dividend growth am I look for?  It depends, in part, on the type of company.  For most companies I am looking for a multi-year average annual dividend increase of at least 5%, and most of the companies I own have higher dividend increase rates.  For regulated utilities, Real Estate Investment Trusts (REITs) and telecommunication companies (like Verizon or AT&T, for example), that typically pay higher dividends, I will accept a lower rate.   For the record, I do not own shares in Verizon or AT&T.

I guess the next question might be, why do I invest in this way?  Well, the answer is multi-part.  First, some context:  Kathy and I have enough income from our pensions and Social Security to meet our monthly budget. I view that as the fixed income part of our retirement portfolios – what some people might get from bonds or annuities.  We do get annual cost of living increases with these sources, though those are limited to a maximum of 2% in the case of one of our pensions and 1.5% for the other two.

We have some money in IRA accounts, funds that were rollovers from the defined contribution portion of our hybrid pension plans in Oregon, 401K plans, and from contributions we made to the accounts in years when we could afford to.  This is where the dividend growth investing happens.  The income generated by these accounts increased by about 11% last year.

The increase came from a combination of dividend increases announced by the companies we hold stock in, and by reinvesting the dividends back into the shares of the companies that paid them.  By reinvesting (buying more shares with the dividends), we have slightly more shares the next time when the companies pay a dividend, which creates a small increase in the dividend payment. The reinvestment is set up to happen automatically with our brokerage firm, and there are no transaction fees associated with the re-investments.

The plan is to continue reinvesting the dividends for as long as possible, hopefully until I have to start taking the required minimum distributions from the IRA in another 8 years, though we could start taking some of the dividends as cash before then if we need or want to.

Our plan is also to avoid being in the position where we have to sell shares in the companies we own in order to generate income – in other words for the dividend income and our pensions/Social Security to adequately fund our needs.  We could certainly choose to sell some stock, but we want that to be a choice.

We currently own shares in 36 companies.  We do not invest in mutual funds or exchange-traded funds.

Where do we get our ideas?  I subscribe to Morningstar’s DividendInvestor newsletter, a service called F.A.S.T. Graphs and participate in a couple of dividend growth discussion groups.

Are there other ways to invest?  Heck yes – and they may well be better suited to many investors or retirees.  Over two decades of personal experience with investing, this is the route I have taken, and it seems to fit our personal circumstances.  I am not recommending this path or any other particular path to anyone.  I am attempting to describe what I do.

It is a fun and so far profitable hobby that ties in well with my past as a research analyst in a whole different field.  Oh, and make sure to read the previous blog post with the disclaimers :).

Finally, I have had a number of mentors and teachers along the way.  The list would be fairly long and the names would not have meaning to most of you, but if I decide to write more about this area of my life, I am sure I will write about the history of how I got here and the people who were important in this part of my path.

Hobby: Investment stuff

A reader commented on an off-handed remark I made about managing the Smith Family Hedge Fund with this:

I’m a lurker from the northwest, have been enjoying reading about your plans and the implementation of them. I encourage you to write about your Smith Family Hedge Fund activities; I’d be very interested in your perspectives. Thanks for sharing your experiences!

With that little bit of encouragement, and it does not take much, I will soon launch into a description of what and how I proceed in this avocation, but first some important disclaimers:

1)  Nothing here constitutes investment advice.  I am neither competent nor licensed to give that.

1a)  Everyone, myself included, is responsible for their own investment decisions.  It does not matter whether you follow the advice of a highly paid adviser, a hot stock tip by an anonymous poster on some internet forum, advice from your brother-in-law or shoeshine girl (or some random dude who writes about his hobby on a retirement blog) – you and you alone are responsible for your decisions.

2)  I may use some company names to illustrate specific points, but that does not mean I am giving a positive or negative recommendation on those companies.

3)  These activities are something I do for fun, but it is serious stuff.  My background as a research analyst is certainly helpful.  What I do is ill-suited to people who do not have the time or inclination to engage is the level of study and work that I do – about 10-20 hours during most weeks.

4)  There are some good resources for folks who do want to learn more and who may be interested in becoming self-directed investors, but many people may also be well served by using a registered financial adviser, investing in index funds or one of the relatively new “retirement date” funds.  I also have no advice on any of those.  I will provide information and web links to some of the resources I use.

If we can kind of agree on those disclaimers and points, I will put some stuff out there in the not too distant future.

Five months in

We moved on January 30. This is an interim progress report of sorts.  We talked a lot about what we thought we would do once we moved to Mérida, so this first section will be comparing that with reality.

Daily activities

We planned to spend time on healthful activities – walking and exercise, buying and preparing healthy foods.  It took a while to get going on the first one.  Kathy is legally blind, which makes walking in the urban environment a bit challenging, given the uneven nature of city sidewalks here.  Then we found the Estadio Salvador Alvarado. We are there at least five mornings a week, walking three to five kilometers.  Mission accomplished.  We also purchased a used elliptical trainer that Kathy just got finished using.  Here is a photo of the walking track at the Sports Center

Alvarado Walk

We are doing a pretty good job of buying and cooking good food.  There will be more food posts later with details about that.

I have semi-jokingly said that I would manage the Smith Family Hedge Fund, and I do spend some time in investment research, reading, and activities.  It is a good fit, given my career as a research analyst in postsecondary education.  I may write a more detailed post about that later.

Housing and climate

We have moved into a longer term rental and are delighted with it.  It is a three bedroom, three bathroom house with a side and back patio and a swimming pool.  I am glad we decided a pool would be a requirement for living in this tropical environment.  We use it daily during this season, starting with morning coffee.  Kathy does water aerobics in it and I enjoy an occasional cooling dip during the day and in the evening.

The pool and the house, with its good ventilation, are making it a bit easier to acclimate to Mérida’s weather.  The temperatures and humidity this time of year are elevated.  We get by with fans and spending time out in the shaded back patio during the day.  The house has mini-split air conditioners in each room, and I have been running the one in our bedroom and in the adjoining study at night, set on 80-84 degrees (27-30 celsius).  After only five months here, it is difficult to say with certainty that we will acclimate successfully, but we have become accustomed to sweating :).  Others have and I am confident we will be able to also.

Day trips and vacations

We bought our car in early May, and have started doing the day trips we planned on before we retired. We talked of trying to do a weekly day trip around the closer to Mérida parts of the Yucatán peninsula, and we have done two.  I have blogged about our trips to Motul and Izamal and will continue to bring short travelogue-y blogs about those.  We initially talked about a 3-4 day trip once a quarter or so.  So far we went on a longer trip when friends from the States were here in March, and a two night trip to Tulum in May.  June saw a unplanned two week trip to the states, and currently we have nothing along these lines planned until a 5 night trip to the Caribbean side of the peninsula in November.

We are planning a major trip to Spain and Portugal for late Spring, 2015, starting by way of a wine tasting trip to California to see old friends.  We’ll see how those plans go.  Kathy wants to see Barcelona and the Alhambra before her retinal disease progresses much further and, having grown up in Brazil, I insisted we spend time in Portugal if we got as close as Spain.

That is about it for now.  I cannot say there have been any major surprises or shocks, no big disappointments or downers.  Life is proceeding well so.  We are enjoying retired life in the Yucatán.

Day trip to Izamal

Before we moved to Mérida Kathy and I spent considerable time talking about activities we wanted to engage in once we retired.  Among others, we decided that periodic day trips around the Peninsula would be a good way to spend time.  We have always explored new places we have moved and this move will not be an exception to that general way of being in the world

This past Thursday we drove to Izamal, one of Mexico’s Pueblo Mágicos, Izamal.  It was about an hour drive, heading down the highway toward Cancun.  There is an old convent there, started in the 1600’s, I believe.  There are multiple Maya archeological sites in the city, and we visited one of them.  Here is the wikipedia link for Izamal

Going on Thursday may not have been the best call.  I was feeling a bit under the weather.  Going in June may not have been the best call, it was very warm.  The average high for June is about 95 degrees, and it made the climb up the Kinich Kakomo archeological site, named after patron deity of Izamal, Kinich Kakmo, the ‘Fire Parrot’, who was reported to descend to earth while the sun was standing in the zenith in order to consume offerings (wikipedia).

Our first order of business was lunch.  A friend in Merida recommended the Kinich restaurant, so after parking near the plaza (and armed with a walking map) we set off to find it.  It was a great recommendation.

P1080412A couple of photos inside the restaurant:

P1080406 P1080407The entrance to the Maya site we went to was just a block or so down the street from the restaurant.

After about half the climb one arrives at a large flat area.  This photo was taken from there:

P1080418We did not make the rest of the climb.  Here is a photo from the entrance to the site, at street level.  At the top of that set of steps is the large flat area from where the first photograph was taken.

P1080413 Another outstanding feature of the town is a large convent, started in the 1500’s.  It is on a large piece of ground, probably built on a Maya site.

Here is what Wikipedia has to say about it (from the previous link to Izamal:

After the Spanish conquest of Yucatán in the 16th century a Spanish colonial city was founded atop the existing Maya one; however it was decided that it would take a prohibitively large amount of work to level these two huge structures and so the Spanish contented themselves with placing a small Christian temple atop the great pyramid and building a large Franciscan Monastery atop the acropolis. It was named after San Antonio de Padua. Completed in 1561, the atrium of the Monastery was second in size only to that at the Vatican. Much of the cut stone from the Pre-Columbian city was reused to build the Spanish churches, monastery, and surrounding buildings.

And I will conclude with some photos taken at the monastery

P1080399The entrance, up a ramp and stairs from the streetP1080400A view of the courtyardP1080430 and a statue of John Paul II, who visited there in 1993P1080432We took a different route back, through Calcachen and Tixkokob. It was a nice drive and we will be back for further exploration of the area.

Next up – Celestun and other Gulf Coast destinations!

 

Five months in

We moved down on Jan 30. It is almost the end of June now, so that is close to five months. We made our first trip to the states in early June, spending two weeks there. Saw family and friends – it was a good trip albeit a bittersweet as speaking at my brother’s Memorial Service was part of trip.

We flew non-stop from Cancun into Atlanta, rode up to Missouri with our sister-in law (cuñada for those of you wanting to expand your Spanish vocabulary) and then rented a car for the rest of our trip.

The nonstop bus ride to the Cancun airport and back to Mérida was about 4 hours long. The advantage was a less expensive flight and the non-stop. Going directly into Atlanta was a more pleasant experience than immigration and customs in Houston or Dallas.

Speaking of immigration, now that we have our residente temporal cards we fill out a immigration form on the way out of the country (do they still call it an FMM form?). We did this at the immigration office near the check-in counters at Terminal 2 at the Cancun airport. The immigration official wrote “residente temporal” at the top of the portion we would keep and use on our way back into Mexico.  Flying back in, our passports and residency cards were scanned.  I understand that if this re-entry procedure is not done correctly your immigration status can move rapidly into limbo.  We are glad to have the experience under our belt and know what to do should we get an inexperienced worker on future re-entries

It was good to see folks and it was delightful to get to our home in Merida. The cat did all right with a neighbor coming over each day to feed him and clean his litter box. She brought her youngest son over with her and he enjoyed petting our old guy.

Tomorrow we are going to take our second Yucatán day trip, heading to Izamal. I will report on that later this week.

Shortie

Bus and airline tickets bought
Hotel reservations made
Arrangements to stay with friends all arranged
Dinners planned
Cat care taken care of
Staff have instructions and pay
If it wasn’t for that one little thing
That Memorial Service
I’d be more excited about this trip.

Oh, still need to call Delta and correct Kathy’s name on her ticket from St. Louis to Atlanta, where we make a connecting flight back home to Mérida the next day.

Damn typos

Thrust once again on death’s bucking bronco

This is not our first rodeo.

A niece died in a house fire at the age of 9; a brother-in-law of colon cancer in his 50’s; our son at the age of 19 (15 years ago) in an accident; a 58 year old brother of a heart attack last year; my father at a relatively healthy 81 in 2011.  Even though we have some experience with the path and know some of the steps, it is not an easy one.  The backbone of death’s horse that is bucking us does not get any softer.

My brother, 13 months my senior and retired one year earlier than I is dying of melanoma.  He saw a dermatologist every year, but there was no outward sign – no mole.  It is stage 4 and progressing rapidly, apparently, now in his lungs his liver and his lymphatic system.  We are likely off to the Atlanta next week, contingent on a conversation with his wife tomorrow after she consults with hospice folks.

John, of Viva Veracruz, recently lost a sister.  I was unable to respond.  I feel a bit bad about that.  To all of us who have lost friends and siblings and relatives at a premature age – we need to keep breathing and living.  Those are our tasks.

As Bob Gibson used to say “shitfuckpiss.”

The formatting on this ee cummings poem may not hold in this post, but it speaks to me today

Buffalo Bill ‘s
defunct
                     who used to
                     ride a watersmooth-silver stallion
and break onetwothreefourfive pigeonsjustlikethat
                                                                                                                    Jesus
he was a handsome man
                                                            and what i want to know is
how do you like your blueeyed boy
Mister Death

International Finance, aka Buying a Car

We have been here for 3 1/2 months now and will have a car by the end of the week – it seems.  This has been a journey and an introduction to doing business here.  We are going to buy a Toyota Avanza and put a deposit down on the car in mid-April – there was a 10,000 peso discount available during the month of April (about  4.9%) and we paid a 15,000 deposit to lock in the discounted price even if the actual delivery did not happen until May.

Attempt 1 – Debit card route

I worked with our financial institution in the US to get permission to do a one time large purchase with our debit card.  They okayed the purchase and I thought I was home free.  I did not realize that the car dealer’s bank also had to approve the charge.  They did not.

Attempt 2 – Funds transfer

Up to this point we had been living fine using our ATM cards.  We have an account through our brokerage that refunds all ATM fees and we were feeling pretty good about that.  However, needing over 200,000 pesos for the car would have taken awhile, so…

We set up a currency exchange account with a Intercam, a firm that friends here have used for some time to transfer funds from the US for living expenses and for larger things, such as home purchase and renovation.  We also opened a savings account with their bank, InterBanco.  We could do a domestic wire transfer from our financial institution to Intercam’s account in a US bank – far easier than an international wire transfer in that it could all be done online.  The only hitch was that there was a limit as to how large an individual transfer could be during the first couple of weeks.  No problem, we moved the money in three transfers over a three day period.

It had been possible to transfer funds by writing a check on a US account and taking it into the local office, but our representative told us they will no longer be able to do that as of June – blaming Mexico (Mexico City) for that.

Intercam then moves the money from their US bank to Mexico on the same day that it gets transferred to the US bank.  I provide our local Intercam representative with the confirmation of the wire transfer and the Fed unique transaction number, known as the Fed reference number.  Once it is received, I provide instructions on what I want done with the funds.  I have a couple of weeks to exchange it to pesos if I want to guess that the exchange rate is going to change in my favor.  I had the transfer done immediately and the funds placed into our local savings account.  So far so good.

Getting the plates, paying the taxes and getting insurance

The dealership is taking care of getting the plates and paying the first year’s tenecia (tax).  I paid them the money, provided them with the documents they needed to do that on my behalf and waited a day.  I received a call last night – apparently they were told that since I drive on a on a US license I have to pay the full tax.  If I had a Yucatán state driver’s license I would pay a lower amount.  By this time I am just like “tell me how much it is and I will pay it.” (turns out it is an additional $310 US).  That should happen today.  I will get the local driver’s license sometime this year and maybe get the discounted rate next year.

Today I will also pick up a check at Intercam to pay the remaining balance on the car.  We are scheduled to take delivery on Thursday.  In fact, the sales agent just called me and gave me the amount of additional tenencia they will need and confirmed that the plates would be there and we could take delivery of the car tomorrow afternoon.

We bought insurance through a local agent, Julieta Morales, who speaks good English and comes highly recommend by many in the expat community.  Full coverage, including 27 days of car rental coverage in case of an accident.  Proof of coverage was required in order to get the plates issued.

Success is at hand

It seems this is pretty sure now but, if any other roadblocks appear, I will certainly inform all of you.

All this means we will soon be taking some day trips around the Peninsula, driving to shop instead of taking a bus or cab and schlepping groceries home (all those wine bottles get heavy), and expanding the availability of restaurants beyond those in walking distance – all good things

Road Trip: Tulum

On Friday we got the maid started at home and headed for Tulum to meet friends for the weekend. I had communicated with Shirlee and Carole on a Playa del Carmen discussion forum for years and we were headed down to meet them and to have a beach day with friends who live in Playa and other friends who were down from the States.

We have stayed on the beach road (Boca Paila) several time. This was our first time to stay in the pueblo, which is several kilometers from the beach. It was a totally different and nice vibe and we will stay there again, at the Posada del Luna Sur.  The food was outstanding.  We ate Friday night at an Argentinian steak house and had wonderful arrachera and Argentina style chorizo.  The next night we ate the best tacos al pastor I have had in 11 years of traveling to Mexico – 4 of us filled ourselves for 123 pesos and the cost of a six-pack.

Drove back home today. Our new rental is feeling like home more than the short-term rental did, in part due to Kathy’s decorating with items we shipped down from the US and her own decorator and “designy” touches.

Here are some photos of the trip.  We hung out the Hip Hotel beach club on Saturday

P1080323 P1080328 P1080329 P1080330The crew:

P1080336Hotel grounds

P1080350 P1080351 P1080353

Move to a long-term rental and other things

The move to the long-term rental

We have been busy.  In late April we moved from our three month rental in the Mejorada area to a long-term rental in Santiago.  Both houses have features we like(d), but this one is proving to be superb!  Three bedrooms, three baths (two full, two half) and lots of windows giving us good ventilation.  Fortunately the owner of the previous house let us know she would not extend the lease longer term before we unpacked most of our boxes from the States, so preparing for the move was relatively easy.

We hired Francisco Gamboa, recommended by Debi Kuhn to do the move.  He came by one evening with his wife to give us an estimate and the next day he showed up with two helpers and his small pickup truck and got to work.  Very industrious fellow.  By noon we were moved, all three pickup truck loads.  Over the next week we finished up and now we are slowly unpacking and deciding where to store things.  I will do another post later with photos of the house and grounds.

We have a one-year lease that we can renew.  The new house is two blocks from the Mérida English Library and three blocks from Parque Santiago and its mercado.

Money exchange and car purchase

We have been in the process of setting up and exchange and savings account with Intercam and InterBanco.  On Monday we will go in and sign the documents.  At that time we should be able to work with our financial agency in the States to transfer enough money to finish buying a car.  We have selected a new Toyota Avanza and have put down a deposit on it, enough to secure the April discount into May.  Hopefully it will all get done next week, but we’ll see.  We are going to meet friends in Tulum next weekend and if we do not have the car we’ll rent one for the weekend.

It seems that setting all this up has become more complicated over the years, due in part to regulations intended to make money laundering more difficult.  I am in favor of that, but…..

Residency status

Kathy’s residente temporal card was issued so we are both good as legal residents for a year.  Our cards can be renewed for three additional years.  At that time we will be eligible for residente permanente status.  We used Yucatán Expatriate Services to facilitate the process and, based on our experience with their excellent service and reasonable cost, can highly recommend them.

The weather

It gets hot here, real hot.  Last week we had several days of temperatures of 100 degrees or higher, topping out at 104 ( that is 38 and 40 degrees for all of you who use global standards for temperatures).  The past several days we have had some rain and more moderate highs, and we are forecast to have three days with highs in the 80’s before a warm up starts on Tuesday.  The lows are forecast to remain in the low 70’s, which makes for more comfortable sleeping with fans.

I have informally adopted a 100 degree rule.  When it gets that hot, I set the AC in the bedroom at 84 degrees before we go to bed.  Otherwise fans work well most of the day.  This is the acclimation phase for us and we are getting accustomed to sweating as a regular feature of daily life.

That is it for now.  With life settling down a bit, with the start-up sequence to life in Mérida coming towards a conclusion, my posts are likely to become less newsy and, perhaps, deal more with matters of daily life here.