53 and plan to retire early

[Robert Thomas]

Hi
I am 53 and I plan to retire as early as possible- at 62, and collect social security
( please- no advice about waiting till I am 66 or 70 to get a bit more money- I know and I choose not to)
I am an Architect- my job is literally killing me
I hope I will last another 10 years....I work in NYC and it is brutal

so
My plan is to collect social security at 62-
and to do what I really always wanted- to flip houses/apts
I love interior design and as an Architect I can really transform crap into incredible
my biggest problem will probably be keeping costs down because I am too passionate about interiors

so- my question is:
will the money I earn flipping effect my social security payment-
a regular job would indeed drastically effect my payments from age 62 till 66 and 66 to 70
can this be avoided ? flipping?
I looked online about this for dozens of hours and noone seems to be discussing this specifically
I know investment income does not effect social security income- you can even have a rental property and that money doesnt effect it
but how about if I flip 2 properties per year and earn approximately 100K each year doing so?
my social security payment will only be about $1500 a month- and typical income would cut that amount in half !! if I had a typical job
but how about income from flipping
I am SURE there is a way that flipping can be set up in a certain way so the income is not taken into consideration by social securoty
there are lots of posts suggesting to set up a business and give yourself an income to avoid regular taxes- but that would do the opposite with regard to social security
so
any ideas
of the best scenerio

I know this site has SO MUCH criticism- telling folks not to do what they plan
lol
but this is my plan
and I will do it
just trying to figure out the best case scenerio to get my full $1500 plus get money from flipping on top of that
thanks!
Rob

 

[pb4uski]

I don't think it would. This is what the ssa website says:

What counts as earnings:

When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net earnings if you're self-employed. We include bonuses, commissions, and vacation pay. We don't count pensions, annuities, investment income, interest, veterans, or other government or military retirement benefits.

You won't have wages and you won't have a Schedule C (self employed)... I would suspect that your flips for your own personal account would be on Schedule D (capital gains and losses) or Schedule E (rental properties).

 

[RunningBum]

I know this site has SO MUCH criticism- telling folks not to do what they plan

Welcome.

My first criticism is that you should start your own thread, probably under the "Hi, I am" forum rather than threadjacking someone else's thread, especially since it is almost entirely unrelated. You say you had trouble finding this topic anywhere, would you expect to find it under this thread title? (EDIT: Mods have since moved this to that forum)

Beyond that, what you call criticism, many of us consider advice. Most people won't criticize a ~50/50 decision like when to take SS, but they might offer reasons why you might want to do differently. Where we tend to get bent out of shape is when someone comes on and says the only correct choice is to take SS at age XX, or claim invalid reasons that are easily debunked.

 

[Another Reader]

Hi
I am 53 and I plan to retire as early as possible- at 62, and collect social security
( please- no advice about waiting till I am 66 or 70 to get a bit more money- I know and I choose not to)
I am an Architect- my job is literally killing me
I hope I will last another 10 years....I work in NYC and it is brutal

so
My plan is to collect social security at 62-
and to do what I really always wanted- to flip houses/apts
I love interior design and as an Architect I can really transform crap into incredible
my biggest problem will probably be keeping costs down because I am too passionate about interiors

so- my question is:
will the money I earn flipping effect my social security payment-
a regular job would indeed drastically effect my payments from age 62 till 66 and 66 to 70
can this be avoided ? flipping?
I looked online about this for dozens of hours and noone seems to be discussing this specifically
I know investment income does not effect social security income- you can even have a rental property and that money doesnt effect it
but how about if I flip 2 properties per year and earn approximately 100K each year doing so?
my social security payment will only be about $1500 a month- and typical income would cut that amount in half !! if I had a typical job
but how about income from flipping
I am SURE there is a way that flipping can be set up in a certain way so the income is not taken into consideration by social securoty
there are lots of posts suggesting to set up a business and give yourself an income to avoid regular taxes- but that would do the opposite with regard to social security
so
any ideas
of the best scenerio

I know this site has SO MUCH criticism- telling folks not to do what they plan
lol
but this is my plan
and I will do it
just trying to figure out the best case scenerio to get my full $1500 plus get money from flipping on top of that
thanks!
Rob

Do you have other income producing assets? A 401 (k)? IRAs? If you think you are going to consistently make $100k annually flipping houses, well, that only happens in a rising real estate market. Look out below if prices start to drop. Most flippers lost their shirts in 2008-2012. Many filed bankruptcy and lost all their leveraged real estate. Hard to come back from that in your 60's.

Flipping is a boom or bust business. Business acumen and substantial reserves are needed to succeed. Talent for design and decor is not enough to make the business work over time. If you have no retirement savings or income beyond Social Security, you have an inadequate income floor and you will not survive.

Your post smacks of desperation. Lay out all the numbers based on what you have currently. If you have nothing other than Social Security, you need to devise a better plan today.

 

[Beststash]

Congratulations!! I retired at 52 and was a little apprehensive but now at 67 I am so glad I did. It has been wonderful. I had a few bumps along the way - major corp cut my promised healthcare and it jumped to around 20K until I could get Medicare. But on the other hand I had time to do a lot of things I had always wanted to do and also I began to exercise everyday and it became a habit. That changed my life.

Everyone's retirement experience is different but I think that it was the perfect choice for me!!

Let the good times roll!

 

[Travelfreek]

Congrats on your plan!!! You sound really happy to start a new career! My husband retired 5 mos ago from a very stressful engineering job at age 59 (a year earlier than planned). He lost 20 lbs and began several sports and lowered all his blood work and blood sugar numbers significantly (while
cutting out a lot of sugars). He's a new man!!!

As far as your question about SS, I'm no expert but I'm guessing your house flips could count as short term cap gains (if less than 12 mos). And you could risk making more than $16,920 a year which would allow SS to take back $1 of every $2 of the amt over the $16,920. I don't see that as being too terrible as you'll be earning a lot more.
In other words, give it a try and see how it plays out. If it becomes a waste of time since you may continue to make too much, you can suspend SS and wait till it makes sense.

 

[Red Badger]

Do you have other income producing assets? A 401 (k)? IRAs? If you think you are going to consistently make $100k annually flipping houses, well, that only happens in a rising real estate market. Look out below if prices start to drop. Most flippers lost their shirts in 2008-2012. Many filed bankruptcy and lost all their leveraged real estate. Hard to come back from that in your 60's.

Flipping is a boom or bust business. Business acumen and substantial reserves are needed to succeed. Talent for design and decor is not enough to make the business work over time. If you have no retirement savings or income beyond Social Security, you have an inadequate income floor and you will not survive.

Your post smacks of desperation. Lay out all the numbers based on what you have currently. If you have nothing other than Social Security, you need to devise a better plan today.

+1. You should consider developing a detailed business plan; and run it by perhaps a CPA, loan officer, or some other unbiased professional. It's okay to have retirement dreams, but if you're betting the farm on that dream, it needs grounding in financial reality.
Best wishes!

 

[Lancelot9]

Hi Rob,

Flipping houses is an active business according to the IRS, not an investment activity, which is passive in nature. As a businessman, you’d be self-employed and your profits would be taxed as regular income. This would also affect your social security payments, I believe.

 

[Raygun99]

Hi Rob,

Flipping houses is an active business according to the IRS, not an investment activity, which is passive in nature. As a businessman, you’d be self-employed and your profits would be taxed as regular income. This would also affect your social security payments, I believe.

Agreed this sounds like a business not investment and will require a schedule c vs schedule D.. end result you will have to pay federal and ss tax on your profits and ss will take 1 dollar for every 2 reported post threshold limits.

 

[nash031]

Hi Rob,

If what you've always really wanted to do is flip houses, why wait until you're 62 to do so? Take FWIW, from a guy who is stuck doing something he doesn't want to do in lieu of what he really wants to do for at least two more years due to contractual obligations.

 

[pb4uski]

This article posits that it could be either investment (Schedules D and E) or a business (Schedule C) depending on facts and circumstances.

The OP could organize his activities to be investment if he wants to but would probably need to be less active as a result. Investment mode would be preferable as he could get LTCG treatment for gains, avoid self-employment taxes and avoid knockdown of his SS retirement benefits.

Bottom line: consult a good tax practitioner and be careful.

https://assets.recenter.tamu.edu/documents/articles/2085.pdf
http://www.bankrate.com/finance/money-guides/tax-consequences-of-flipping-real-estate-1.aspx

 

[flyingaway]

Looks like you are not retiring, you are to start your own business and make others stressful.