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39 and thinking.....
Old 01-14-2010, 10:06 PM   #1
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39 and thinking.....

Hi all, it's been a long time. I used to frequent the motley fool board way back in the day, then have followed this one and intercst's as well. Haven't posted anything in a while, lots of changes...

Well, after the dust settles it looks like I've just breached the $1M mark. That is in net worth and includes things like 3 houses (2 are rentals, 1 is primary residence), and some in various 401ks. I got laid off a while ago from a good paying job and I'll tell ya, there ain't much out there right now! Anyway, the details make for a hell of a story but that's for another time. What I'm trying to figure out now is if I should even go back to w*rk ?

I've been thru the numbers in all different types of scenarios, and it comes down to this, if I tap my 401k (IRA transfer) using the 72t exception, it looks like I can stay in my current house (pay it off) and have plenty of money with a 4% withdraw (could even go lower if need be). Now, If I sell my place (nice place on a lake tho...) and buy a cheaper place, it would make it that much easier. Or I have been thinking about going back for another few years to get another 100k or so saved up.

I'm pretty damn sick of w*rking, I certainly know how to live frugally, guess I just need to do a brain dump of this stuff in front of a like minded community. Hard to talk about this with my friends, they aren't jealous and have always known of my desire to retire early and support it, but they can't wrap their minds around how it could even be possible.

Not sure what I'm looking for, but all comments are welcome...
sorry its so long...

-Pan-
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Old 01-14-2010, 10:45 PM   #2
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If you have a way to take care of health insurance then maybe Early Semi Retirement might work. Read Bob's book and find something to do part time if needed that you like.
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Old 01-14-2010, 10:52 PM   #3
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Originally Posted by panhead View Post
Hard to talk about this with my friends, they aren't jealous and have always known of my desire to retire early and support it, but they can't wrap their minds around how it could even be possible.
-Pan-
It seems to me you've done your homework, it's your life....live it the way you want.

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Old 01-14-2010, 11:26 PM   #4
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I'm pretty damn sick of w*rking...
Wait until you've put in another 25 years.
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Old 01-15-2010, 07:08 AM   #5
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Yeah, health care, always in issue. Right now its factored in at about a $250 policy plus some slack for copays, meds, etc. I know in the past there have been polls and the like about the size of peoples nest eggs, I think many were doing it with around $1M. I've looked into many scenarios that will work, some involve more rental property (semi-retirement then i suppose lol), but even that would not be necessary if I down size enough. If you guys are up for some nit-picking, I'll post more details so the forum can try to poke holes in the plans.
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Old 01-15-2010, 12:31 PM   #6
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Old 01-15-2010, 01:54 PM   #7
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Not sure what I'm looking for, but all comments are welcome...
Hey, since you have the time, you could try a pessimistic analysis of your rentals. Conservative assumptions for upcoming maintenance, allowance for surprise repairs, maybe a 10% vacancy rate. Then see if your monthly net is above or below CD/bond dividend rates. Think about whether you could get away with a rent increase.

Take a look at your rental equity, what you'd pay in sales fees/taxes and depreciation recapture, and keep monitoring the sales market. Decide if your after-tax equity would do better than your current net rental income, or if you'd rather buy a CD/bond/REIT.

I find that a detailed analysis and discussion of these sorts of options clarifies my thinking and helps scare us back to work decide whether it's ER or semi-ER.
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Old 01-15-2010, 01:57 PM   #8
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Are you going to take 4% of your initial portfolio and adjust that initial amount for inflation each year? Or just take 4% of your portfolio value each year - whatever that may be.

The former is okay if you're close to the normal retirement age. I (49 now) chose the latter using the formula from Bob Clyatt's book.

Think long and hard about the house. If it gives you joy, don't rush to sell. Having people to socialize with close by becomes even more important in ER. I was surprised at how much work satisfied that aspect of my life.

Location matters for healthcare. Some states are better than others in protecting you from the insurance companies.
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Old 01-16-2010, 10:52 AM   #9
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It wouldn't be a 4% withdrawal from the portfolio as I have some of that coming in as rental income. I haven't thought about exactly how I will continue the withdrawals year after year, but once I figured out the allocation of my income from all sources, whatever the initial withdrawal from the liquid (invested) portion of the portfolio is (<=4%) based upon what I need for income would continue, adjusted for inflation if I felt the need. The longer I am unemployed, the better I get at saving money as I have the time to look into things further (food, cable, internet, etc) so the withdrawals could even go down. I like to travel, but am much more into the camping/hiking thing then the 4 star hotel thing. Still need to iron out the plan as to whether I am going back to work or am going to do this. I also have many resources to make some bucks on the side after I retire, should I decide to do so, but it at most would be about $10k a year working very little.
Still gotta find the time to post further details, hopefully after the weekend!
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Old 01-16-2010, 11:11 AM   #10
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I love that you are possibly already retired/laid off, not actively looking for work at the moment, and so busy that you con't post details until after the weekend. Honestly, I don't think that I'd hesitate, especially if you can do some side work as you've mentioned to add some flex to your budget. Heath insurance is the kicker as always, but your life right now is full enough that you can't update an internet board, can you really face giving that up to work again??
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Old 01-17-2010, 11:30 AM   #11
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Yeah, health care, always in issue. Right now its factored in at about a $250 policy plus some slack for copays, meds, etc. I know in the past there have been polls and the like about the size of peoples nest eggs, I think many were doing it with around $1M. I've looked into many scenarios that will work, some involve more rental property (semi-retirement then i suppose lol), but even that would not be necessary if I down size enough. If you guys are up for some nit-picking, I'll post more details so the forum can try to poke holes in the plans.
I would assume a 8-10% inflation rate on your health insurance...then
figure out what this does to your plan.
I've heard the US Govt is hiring
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Old 01-17-2010, 12:29 PM   #12
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I love that you are possibly already retired/laid off, not actively looking for work at the moment, and so busy that you con't post details until after the weekend.
Life is great as a retiree, but I can relate - - retirement doesn't have to mean that we stop having fun on the weekends.

Quote:
Originally Posted by seabourne
Honestly, I don't think that I'd hesitate, especially if you can do some side work as you've mentioned to add some flex to your budget. Heath insurance is the kicker as always
I agree, though in just a few more months you will know whether the government health care bill ends up solving the health problem for you. If it doesn't, you may have to work a little to pay your health care costs (or not).

Another consideration is your house - - if you really want to be sure that you won't have to downsize, then another option would be to maybe work full time a little longer and pay it off before you retire.
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Old 01-17-2010, 01:58 PM   #13
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Heh Heh, I actually have been looking for work, even had a few interviews, but when you come from a high paying little niche industry that sells capital equipment, during a recession you are the first to go and the last to recover! Thanks for all the input so far. I should have time to post my situation tomorrow night in more detail.

Yeah, weekends are when your buddies have time off, so gotta spend time with them when they have it. Tell ya'll one thing, I've gotten more work done on my projects in the past six months than I have in 12 years!
It's great !

Whatever I decide, this has been a great taste of freedom! I REALLY know now why I have been working so hard toward this end, and I know it is right for me.
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Here's an overview:
Old 01-18-2010, 05:05 PM   #14
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Here's an overview:

OK, here is a quick overview of my situation and what I'm thinking....
First, assets

My house
equity 115k
mortgage 135k

rental house 1
equity 160k
mortgage 0
net cashflow 500/mo 6000/yr

rental house 2
equity 34000
mortgage 65,000
net cashflow 0
(two family owned 50/50 with a partner, so all of this is 1/2 value)
(This house easily pays for itself, but we don't pull cash out now)

House 3
equity 117000
mortgage 0
not rented at the moment
(owned 50/50 with a sibling so this is 1/2 the value)
(have the option to buy out sibling from this house for 117k)
Would rent for about 1200/mo cashflow would be about 500/mo 6000/yr

Investments:
After tax: 385k
before tax: 190k

other assets: 40k

total equity and investments: $1,041,000

Current expenses: 32k
Expenses if I pay off mortgage on my house: 24k


Now, options are many and varied, sell the house I own 1/2 of with my sibling, sell my house and by a cheaper house, buy out my sibling and rent the house I own 1/2 of, etc. The two family will remain owned and not generating an income for the immediate future, however will be a kicker later in life. The house I own 1/2 with my sibling is truthfully a poor rental, it has high fixed costs and single family houses have a problem with economy of scale vs multi families. I am not apposed to selling my house as I can find one much cheaper close by, but I live right on a lake, which is nice. But then again, when you're retired, getting to the lake isn't so difficult, lol ! I've run several scenarios and it appears in order to retire now I will need to tap the pre tax investments thru 72t or whatever. This is not a deal breaker, just a comment. I can likely buy a house I would be happy with for about 125-150k. It will need some work, but I do that myself. There is even the option of moving into my two family which would cost me 750/month (tho i'd be paying it to myself so to speak).

Couple more random notes: My estimates on equity of houses and value of assets are current and very conservative, it is very likely they are worth more. My expenses also have some slack in them. I'm also not thrilled to sell my real estate right now as I think most of us feel it is very depressed right now, tho this is usually a bad reason to hold onto real estate..... Also, net cash flow from real estate includes vacancies and maintenance.

I know this isn't perfect as it's not clear how my expenses would vary with the different options, but I'm curious what you guys think and what you come up with. It wouldn't kill me to go back to work for a couple of years (if i can find a job, lol) but I'm curious if I can come up with a good enough plan where I don't have to.

Thanks!
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Old 01-18-2010, 06:39 PM   #15
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congrats on your progress. I think that is awesome. based on what you have said, I would be inclined to sell the sibling house and potentially sell your house. This gets you north of $840k liquid (assuming the other 40k are liquid) ~ 4% withdrawal you are $33,800. Oh yeah, you still need a place to live. Minor detail....take 50-75% of your equity from primary to put down on new $150k house that you mentioned. This still gives you a liquid of $780k or so and 4% withdrawal of $31,400. You now have the flexibility to refine the frugal lifestyle you have chosen and you can do some side work, at your discretion, as you mentioned for an additional $10k or so. Well done...and you can always go back to work. IMO, if you sell 1 or more property you will still have some rental income and you have a very decent nest egg, for your age to offer some flexibility.
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Old 01-20-2010, 01:05 AM   #16
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sounds like you are on the right track.
on to other important issues...do you own a panhead?
i am restoring my '53FL & have a few knucks & 74" flatties...
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Old 01-20-2010, 05:47 PM   #17
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Maybe i'll post a few of the plans I was considering under fire/money thread to make this more clear...

As for a panhead, yup, I also have a 1953 FL. She's a bit custom and not quite done yet. straight leg frame, jockey shift with heel/toe clutch, 16" apes, Pogo, etc. Just needs wiring and a few other minor things now. Compared to some of the choppers I used to ride in my (misspent) youth, this one is safe, lol !

Hmm, might have to re-think my health care costs.....

By the way, I absolutely love knucks and have been keeping an eye out. This is one of my hobbies that could make me money if I retire. Oh yeah, flatties are great too, always wanted to build a bobber flatty. My buddy's old man has an ice machine he made out of a 45 flatty when he was a kid, crazy thing, vega rear end, school bus seat, single ski up front, forgot what the tranny was out of. He was a smart cookie, even way back then...and back then he found the motor in a trunk of a junk car....

-Pan-
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Old 01-28-2010, 01:19 AM   #18
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here is a pic of my 1938 UL 74" flathead i restored in '92 & my old 1946 EL 61" knucklehead that i sold to use as a down payment for another house in oregon.
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Old 01-28-2010, 01:23 AM   #19
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pic of my 1953 FL hydroglide before i tore it down to restore. 6 years later i am still working on it...very slowly.
making faster progress on the pan that my '40 knucklehead bobber. been working on it for 20 years!
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