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Old 08-30-2013, 03:38 PM   #1
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I've been reading this forum for a few months. I've learned a lot and wanted to say thank you. I thought I would introduce myself and ask a couple of questions.

I'm 54 and my wife is 59. I work for a megacorp. The job is ok, but I can't travel like I want to while working. So, I'm thinking about retiring in a few years while we are in good health. My wife is retired and manages our rental property. As my screen name says, we live "In the Sticks" with a low cost of living.

I have invested heavily in rental property. It I've owned it for 20 plus years and it is paid off. My thought is to sell it and finance in my early to mid 60s. I'd require at 20% to 30% down with a 15 to 20 year note. I'm doing this to spread out the income. I've owned it long enough that cap gains is going to be significant. There would have to be a prepayment penalty for any borrower. The current value of the property is about 1m. The property consists of 2 apartment complexes that could be sold in two different years to spread out the income. Has anyone else done this?

I'm currently contributing enough to my employer's 401k to receive entire match. There is no Roth option.

Other assets, about 400k in 401k and IRA. Most of the 401k and IRA money is in my name, but some, about 40k, is in my wife's name. She is already 59.5. If necessary, she could withdraw without penalty now. I also own some unimproved land worth about 350k and I owe about 100k on it. House is paid for and no other debts. About 70k in after tax emergency funds.

I'm thinking about retiring in the next 3 to 5 years. We would live off rental income until sold plus wife's SS, which she would be eligible to draw at that time. Her benefit is much lower then mine. I was thinking she could start SS at 62 to 65 when I retire. I would start drawing at 70. If something happened to me, she could switch to my survivor benefit. Would the fact that she started drawing SS before her FRA impact the survivor benefit?

What do you think?

Thanks!
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Old 08-31-2013, 12:33 PM   #2
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My comment is that your liquidity is low for $1.5MM in total assets, $70K emergency savings and the rest tied up in either tax advantaged savings or real estate - which is a relatively illiquid investment vehicle.

What is your expected annual spending after FIRE ? Medical Insurance ?

The rental real estate will throw off some return, but is probably a full time job by itself. How much per year is the return.

I would be concerned having the real estate so dominant in your asset mix.
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Old 08-31-2013, 02:43 PM   #3
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Welcome to a great forum.

Don't forget the OP has 400k in 401k , and IRA. There are ways to tap those without penelty before you are 59.5.

That said, during your next years of working, consider building up your liquid reserves. If I had the two rentals I'd think of selling one as the market climbs higher.

Your unimproved land is interesting to me. They ain't making any more of it, and your costs are taxes. Of course YMMV.

MRG
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Old 09-02-2013, 09:52 AM   #4
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Thanks for the replies.

Our annual spending after ER should be about 60k. I know this is approximately the upper limit of the ACA subsidies for a couple and I plan on managing to that. Currently, We are on megacorp HI. We are going to need to get HI through an exchange when I retire. With my timeframe of 3-5 years, that should give enough time for the kinks to be worked out of the ACA. I expect to pay about 6k per year for HI though an exchange with subsidies. We'll all know more about this on October 1st.

Our rental property nets about 40k per year. I think my wife's SS will be about 7k per year at 62. I know that doesn't add up to 60k, the remainder could come from consulting, part time work or 401k/IRA. We could first use my wife's IRA until I am 59.5. At my earliest retirement date, 3 years from now, I would only have a couple years until I hit 59.5, so I shouldn't have to tap my 401k/IRA and worry about penalties.

My goal before retirement is to payoff the loan on the unimproved property. That is necessary to keep my income down below 60k for ACA subsidies. It is also for peace of mind.

Regarding the unimproved land, I also use it for recreation and the standing timber has substantial value.

I know I have a very high percentage of my NW in real estate. I have owned my rental property long enough, over 20 years, that I feel very comfortable with that. I like the consistent returns it has given me over those years.

Thanks for the replies, keep them coming.
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Old 09-02-2013, 10:14 AM   #5
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Quote:
Originally Posted by InTheSticks View Post

Regarding the unimproved land, I also use it for recreation and the standing timber has substantial value.
.
A dream come true for me. My first career was in logging, sawmills, timber. Never ever, ever trust an independent log buyer. Your state conservation agency should have foresters to help you. Some states have 'Master logger or similar name' programs. Use those resources.

Good luck,

MRG
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Old 09-05-2013, 08:28 AM   #6
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Quote:
Originally Posted by MRG View Post
A dream come true for me. My first career was in logging, sawmills, timber. Never ever, ever trust an independent log buyer. Your state conservation agency should have foresters to help you. Some states have 'Master logger or similar name' programs. Use those resources.

Good luck,

MRG
MRG, thanks for the advice. I have much research in this area.
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