58 yr old needs your sage advice

[Mountain skier]

Hello. I am a first time poster who has learned a lot from you wonderful folks. I realize I could retire now in our current house or one close in the same value, however we wanted to move to a particular beach town where we vacation each year. However, to move there I would need to work several more years.

DW & I both 58 yr old
$675,000 (50% S & P 500, 50% CD's and $ Market)
pension will be $30k/yr
house $275K (own it)

I am willing to go back into practice (physician) for several years to fund difference in housing/taxes for a home near beach. Houses cost $675k and up

Our yearly expenses are $45-50k not including heath ins

 

[Texas Proud]

If that will make you happy then do it...


But, remember to factor in the higher expenses of a more expensive house... at minimum taxes and insurance will be higher... and insurance maybe much higher...

 

[pacergal]

You wrote that you "are willing to go back into practice". Did you already retire, and now realize you want to move and do not have the funds required?
If so, then do what your heart desires, and it sounds like returning to work is what you and your desired lifestyle need.

 

[Mountain skier]

Thanks for your response. I have cut way back my hours.

Property taxes would be about $8-10K/yr. Not sure about how much health ins is via ACA.

A big issue is: is it worth it to have to work perhaps 5-7 years more to live where you truly want? vs. retire now or at least very soon and live as we do now. (I realize that is a very personal decision).

Thanks in advance for your sage advice

 

[Lewis Clark]

Can you find a way to work in the new location (part time or full time) to make the numbers work for you?

 

[Spock]

Dunno about your assumptions and dates, but off the hip 675K total savings sounds doable but thin with little margin for surprises to retire in a HCOL area.

 

[Jerry1]

Can you find a way to work in the new location (part time or full time) to make the numbers work for you?

^^This^^ Is what I would try to do - part time. Otherwise, I personally would not work 7 more years to live in a better location. I also think, even if you could make it happen, you’d be running too thin. I’m no expert, but a $50K budget in a beach town doesn’t seem realistic. I’m sure where there’s a will, there’s a way, but i think it would be tough. $8K in property taxes alone is over 15% of your budget. And when you say $50K not including health insurance, does that mean your budget is closer to $60K in order to pay for heath insurance? Also, don’t forget taxes.

 

[Teacher Terry]

I agree with Jerry.

 

[joeea]

A big issue is: is it worth it to have to work perhaps 5-7 years more to live where you truly want?

Obviously only you can make this call.

Think about the converse: are willing to live the rest of your life in a place you don't truly want, just so you can retire 5 years earlier?

For me the obvious answer is No. Your mileage may vary.

 

[ivinsfan]

So unless you could find part time work that includes full HI, part time income that pushes you over the ACA cliff can cost you a lot of money. IOW your HI costs will be at market rates.

If you don't mind my asking why don't you have more savings? You need to either service a 400K house payment or save up 400 in cash. If you can do that in "several more years" why isn't your nest eggs bigger. It looks to me as though when you cut back your hours you made the option of upgrading to a more expensive area much more difficult. You spend 45-50 a year with no house payment where does the rest of your money go....

 

[Mountain skier]

I appreciate your insights thus far. I would not to practice there. If we delayed 4 years we would receive approx $60k/yr SS & pension. I would not want to drop below $500k after house purchase (at least to start). Thus- we would have $80k/yr of income

 

[OldShooter]

In an adult-ed investing class that I teach, I have the following with the slide title "Pop Quiz:"
---------------------------------------------------------------
You’re 75 years old, healthy, and reviewing your financial situation. Which would you prefer?

A) You find that you’re running out of money.

B) You find that you’ve saved more money than you really need.
​

---------------------------------------------------------------
You are looking at +/- 25 years of retirement with only $675K in assets, much less (net) if the $675K is in an IRA or 401K. I don't think that's safe even if staying in your current house even if it makes the retirement calculators happy.

Remember that the $30K pension, unless COLA'd, will probably diminish in buying power by 50% over the 25 years. Same-o for those dollars in your savings. Said another way, that $50K annual expense might need to be $100K to buy the same things.

"Beach town" just adds to the risk. Ignoring house price and expenses for a minute and just look at some Mexico Beach pictures from Hurricane Michael. Will you have the funds to recover from something like that: https://www.cnn.com/videos/us/2018/10/11/myers-mexico-beach-hurricane-michael-reaction-vpx.cnn

Grinchy, I know. Sorry.

 

[footenote]

Here's a handy ACA calculator: https://www.kff.org/interactive/subsidy-calculator/

Remember that any portfolio draw-down from qualified funds (IRA or 401K) will be treated as ordinary income. (Part of your Modified Adjusted Gross Income (MAGI) in ACA-speak.) Ditto for your pension.

Without subsidies, ACA premiums can be very high when you're older (but not yet 65) and with income above 400% of the federal poverty line. Good luck!

 

[Rianne]

"Retire" means different things to different people. DH/me consider ourselves retired and living in an area we love near family and in a University town. Our net worth is higher than yours, but DH chose to consult to stay connected to his field and friends in the field (food science). He makes his own hours, is able to vacation when he wants, to to YMCA, take walks etc. He earns approx. $42K and we have not taken SS yet.

We're living the dream. You have to make that decision, although spending habits mean a lot. We're pretty frugal. To live in a HCOL area, I'd consider the part time gig.

 

[pb4uski]

You might want to run your situation through FIRECalc. I put in your info with $50k spending, $675k portfolio, 35 year time horizon, $30k fixed pension starting in 2019, $30k SS starting in 2023, a 50/50 AA and $29k a year of mortgage payments and got a 94.7% success rate. YMMV.

You might be able to have you cake and eat it too... especially if you are willing to do some part-time work in your new locale for a few years.

 

[GR111]

The world is your oyster, follow your heart....luckily you have options. When I can, I tend to lean towards the simpler, more conservative options to avoid future stress.

 

[Mountain skier]

thank you PB for running those numbers...very encouraging

 

[pb4uski]

thank you PB for running those numbers...very encouraging

You really need to run them yourself because I was lacking details, but from the info that you provided it seems a possibility. You'll need to nail down what you spending really is including occasional car replacements and the like, and health insurance.

 

[sturbridge]

Maybe I'm just not understanding the math y'all are using, but this is how I am looking at it:

OP says beach houses go for 675 and up. Buying a house would wipe out his entire savings (and perhaps some of the equity in his current house). He then has 30K pension to cover a 50K lifestyle + health insurance + additional property taxes . Where is the 20K-40K per year deficit going to come from? Selling his current house isn't going to cover this deficit for all that long.

 

[Breedlove]

I say look for a smaller home in the beach town or a fixer upper . If you can afford the taxes and fix up a cottage and live your retirement in a beach lifestyle do it . Working a few more years never make you better off . It will just take time from your life . Heck a fixer upper can be fun . But remember if the beach town is on salt water you will have more maintenance then a country home.

 

[pb4uski]

Maybe I'm just not understanding the math y'all are using, but this is how I am looking at it:

OP says beach houses go for 675 and up. Buying a house would wipe out his entire savings (and perhaps some of the equity in his current house). He then has 30K pension to cover a 50K lifestyle + health insurance + additional property taxes . Where is the 20K-40K per year deficit going to come from? Selling his current house isn't going to cover this deficit for all that long.

He later said that between pension and SS he would have $60k/yr of income.

..... If we delayed 4 years we would receive approx $60k/yr SS & pension. ....

 

[joeea]

Working a few more years never make you better off .

Never?

 

[Mountain skier]

Maybe I'm just not understanding the math y'all are using, but this is how I am looking at it:

OP says beach houses go for 675 and up. Buying a house would wipe out his entire savings (and perhaps some of the equity in his current house). He then has 30K pension to cover a 50K lifestyle + health insurance + additional property taxes . Where is the 20K-40K per year deficit going to come from? Selling his current house isn't going to cover this deficit for all that long.

clarification: $675k liquid + $275 house= $950k
will have $60k from SS and pension
need to cover difference if want to move there (would need to have $225k extra)

My decision will be based on if I think it is worth it to work a few more years to make up the difference or just retire now and stay here

 

[Jerry1]

So a $500K house and an $80K budget. Please run you numbers and really think about your budget. I guess if you like to walk on the beach and not much else, I can see it but I just think you’re running too thin. I think income taxes, property taxes and health insurance, along with normal house maintenance and car replacement is going to leave you very little to live on. If you really run a tight budget, I think it could work, but you’re leaving yourself with little cushion.

 

[ivinsfan]

What happens to your 60k income when either you or your spouse is gone what is left for the surviving spouse.