Did we become retired by accident?

[Delilah]

So questions first and then people can read my long explanation if they want to.
If all you have is passive income is there a place to invest it that is tax advantaged for retirement? How much of our income should we save per month for old age? Where should we put it? How large does our emergency fund need to be? Should we double up on any or some of the mortgages? We have between 1500-2500 a month to invest or save. Thank you in advance for any advice you may have.

We live off only passive income starting last year not by choice,my husband developed health issues and I take care of him and his parents. The issues prevent him working but do not come with large medical expenses thankfully. It feels weird sharing all this with strangers but I have no idea who else to ask. I have never been in charge of finances before but my husbands injury makes money management impossible. Honestly just paying the bills has been a new and not very pleasant experience. He had issues that we werent aware of and since he always handled the money things got a little messy before I took over. The learning curve has been intense and I remain fairly terrified that I will somehow bung it all up.

The first thing I did was pay off our credit cards,car and second mortgage by selling everything we didnt need which got us out of "bad" debt. I'm not ignorant of finances,its just that he was better at it and I was busy dealing with his parents and mine. However knowing what to do from here is what I worry about. There is so much conflicting advice online. My biggest fear is not having enough for "real" retirement and having no way to earn money at that point. Housewife ,it turns out is not a job skill that translates to a paying job well.

We are 49 and 50 married,no kids husband stopped working last year, I quit working in 2000. We make 9300 passive income through rentals per month + 2444 quarterly but we hope to be getting a further 1400 a month in the next year. We also have one work trade rental on our property. We have 330000 in stocks, dividend bearing,berkshire etc,40k in roth and we have 85000 in savings. We own outright a triplex and 4 single family and also a percentage in a family owned mixed use real estate,there is no mortgage on that one either. We have mortgages on 3 others. Our home which is 97000,another home 100000 and a quad plex 108000. Total payments are 2400,we pay over minimum. We expect to have them paid off in 15 years. We do have a lot of equity.
We have one equipment payment 650 a month interest free and no other debt except for home depot for rental repairs which when we use it we pay off before the interest period ends. 4400 a month goes to property/ tax insurance and the mortgages. We spend a further 3000 on living expenses including health insurance We dont currently travel much due to family issues,we dont have expensive hobbies,we dont eat out often,we have no vices except for large dogs and several other animals. We intend to downsize in the next 10 years and convert our home to a rental. Our home is a 40 acre farm with a 3/2 home,a 2/2 rental unit (work trade)and a 1/1 inlaw unit where my aunt lives. A studio could be added as well as a 2/1 with approximately 30000 invested if we did the work ourselves . The structures are there,wired and water they just need interior work done.

Our property adjoins my inlaws 27 acres with 3 living units(only one in use)which they bought 2 years ago so they could be close by. We care for them,although currently thats just keeping the property in shape and helping them with chores,bills,shopping,gardening,driving etc, not actual caregiving.

He will receive a small pension at 65 and s.s,I have no idea if I will get ss,its doubtful since my work history was very short.

We took some hard hits in the last year including a couple bad investments that cost us close to 100000 and damage to some rentals that cost 30000 of which insurance only covered a small portion. In addition both his parents and he and I had some medical stuff,nothing treatable for me and nothing incapacitating for his parents but he has been very much affected and so this too makes me nervous. Everything at this point does. Its like there is ominous music playing in the background on a daily basis.
My husband thinks I'm being over worried since we could move into one of the units on his parents property and rent our place for 2500 a month if we really needed to.
I feel like we should save as much as possible now so we arent caught by surprise again and so we can recoup our losses. It feels like we have been extraordinarily blessed to have come this far with what we have and at the same time I feel pretty wrung out ,its quite confusing to be honest.

If you got this far than thank you for you time and any advice you may give.

 

[Maenad]

Quick first glance I'm seeing:
Income - 9300/month + 2444/quarter
Expenses - 4400 for properties + 650 equipment + 3000 other living expenses = 8050/month

If this is correct, your income is greater than your outflow and you can take a deep breath, you're not going into a hole every month. That's usually the first step in getting finances in order - stop digging any holes you were digging and get your expenses below your income.

I'd recommend tracking your expenses to keep an eye on them. Some people like spreadsheets, some like to use "You Need a Budget", there are lots of options out there (we can help as well if you need it).

Also, how many of your bills are automated? I find it much easier mentally to know that the electric bill is taken care of and I don't have to remember to write out a check.

Investing stuff can wait a bit while you get your feet under you, but I'm sure a bunch of people here will have good advice soon. And remember - none of us were born knowing this. You may be starting later than a lot of people, but we were all where you are (in terms of knowledge/ignorance) at one point. You can do this!

 

[audreyh1]

He will receive a small pension at 65 and s.s,I have no idea if I will get ss,its doubtful since my work history was very short.

You qualify for SS on your husband’s record assuming you’ve been married long enough. If you survive your husband, you would receive his SS.

 

[Golden sunsets]

Welcome Deliah. My goodness you have a lot on your plate. A few questions right off the bat. With so much rental real estate, who manages the rental of and repairs and maintenance to all of these properties? Is your husband able to do it? If not, is there a plan for when there is a vacancy or need for repair and maintenance? Secondly, if your husband is unable to work, does he possibly qualify for Social Security disability?

You seem very worried about missing something major, which I can understand if you have not been involved with your finances. One thing you might do to alleviate your concern is gather your checking account statements(on line if necessary)(including accounts that funds are typically withdrawn from) and go through a year or two of them to review all transactions. You might find items you haven't thought of, or you may not, which would ease your mind.

I think you will gradually become more comfortable with these new responsibilities after you have been at it for a few months.

Do you have enough help though? It seems like taking care of the physical needs of your husband and his parents, as well as managing all of these properties and the financial matters of both you and your in laws is a lot to handle. You may need to start thinking about an exit plan for liquidating all of the real estate. Selling the real estate, methodically, and investing the proceeds in safe investments that throw off income to replace the rental income and downsizing to a manageable residence for you two and your in laws may be advisable eventually to simplify your lives.

 

[joeea]

I have never been in charge of finances before but my husbands injury makes money management impossible. Honestly just paying the bills has been a new and not very pleasant experience. He had issues that we werent aware of and since he always handled the money things got a little messy before I took over. The learning curve has been intense and I remain fairly terrified that I will somehow bung it all up.


However knowing what to do from here is what I worry about. There is so much conflicting advice online. My biggest fear is not having enough for "real" retirement and having no way to earn money at that point.

He will receive a small pension at 65 and s.s,I have no idea if I will get ss,its doubtful since my work history was very short.

Its like there is ominous music playing in the background on a daily basis.

I feel like we should save as much as possible now so we arent caught by surprise again and so we can recoup our losses. It feels like we have been extraordinarily blessed to have come this far with what we have and at the same time I feel pretty wrung out ,its quite confusing to be honest.

You should be talking with a fee-only fiduciary financial adviser.

They can help you come up with a plan going forward, based on your goals, your assets, and your income.

Let a professional help ease your worry. You don't need to do this all by yourself.

 

[ivinsfan]

That's a lot of info..I might suggest you make an inflow and outflow column just for clarity...

Without needing to go into detail are you saying your DH now and in the future will be mentally or physically so impaired that he can do not money management? Is your DH going to need caregiving from you going forward? Caregiving might impact your expenses.

And go easy on yourself from what you have written your stress level must be off the charts and stress always make it harder to deal with anything important.

You don't have to do anything now but get the bills payed. Next step a budget on paper. Think about your rental repairs, who will take care of that going forward? Repairing and managing rental can be a time consuming job, add that to the care of 5 other people if I added correctly and you are heading directly for burnout. No wonder you are nervous and waiting for the sky to fall. Just pay attention to what you have going on now and don't dwell on what you might do in 10 years.

Do your budget first as 3000K a month including private health insurance seems a little on the low side. Remember to put a line in your budget for car replacement and home upkeep. Don't forget income taxes in your total.

Please continue to post you will get great advice here as well as emotional support. We are here for you...

 

[Bestwifeever]

I felt the weight on my shoulders just reading your post. You have five people the generation older than you (including the aunt who lives on the property), and your husband to care for, and a ton of finance stuff. You'll get good advice here--keep posting and try to take care of yourself too.

 

[Rianne]

Welcome, Delilah. You wrote:
"We are 49 and 50 married,no kids husband stopped working last year, I quit working in 2000."
Really? Sounds to me like you're the CEO of a small business. So much is on your shoulders. The situation you present is a project. I'm not a religious person, but do you have a local church? Dave Ramsey holds seminars in churches and community centers. He offers a low cost, if not free education in organizing finances. You're a very busy woman, but take time to re-organize. Actually,you're in a pretty good financial situation. Sadly, everything is weighted on your shoulders.

Your OP has many moving parts. Take each part and make decisions that connect the big picture. Almost like a big jigsaw puzzle. I look at our finances that way-especially withdrawing to FIRE with minimal tax burden. Have confidence. You were able to put together your picture, that's a big step. Now, break it down piece by piece.

I hope you continue to post. There are so many smart posters here to help.

 

[SumDay]

You should be talking with a fee-only fiduciary financial adviser.

They can help you come up with a plan going forward, based on your goals, your assets, and your income.

Let a professional help ease your worry. You don't need to do this all by yourself.

Great suggestion. You can find an advisor here: https://www.napfa.org/

We've had ours for years and value her advice and suggestions.

Good luck to you. You sound like superwoman to me!

 

[gwraigty]

We have between 1500-2500 a month to invest or save. Thank you in advance for any advice you may have.

We live off only passive income starting last year

<snip>

Housewife ,it turns out is not a job skill that translates to a paying job well.

First off, you're better fixed than many people. If you have that much money left every month after paying expenses, you're already doing quite well living off your passive income.

If you'd like to increase your passive income, invest the monthly surplus conservatively, to start. (Data point: I invest for passive income, not growth so much. Others here are better suited to advise you on growth investing.) Online savings accounts are one option. Do you have a brokerage account? I use Fidelity and Schwab.

Conservative investments can include a money market mutual fund and commission-free new issue brokered CDs, to start with. When you're comfortable with those, you can explore ETFs and NTF mutual funds. Some conservative choices include short-term to intermediate-term bond funds, both government and corporate, high dividend general stock funds, or utilities funds.

It's a lot to learn. Please take your time.

I have to address your last comment. I've been a housewife since 1992. It's not true that you wouldn't be able to get a paying job, if you should need one. You might not be able to get a job in your former field of work, but you could still get something. That said, I don't think you need one.

I've always been interested in the idea of earning passive income. Make learning about it your job. My husband still works, by choice, because of investment choices I made years ago, and continue to make today.

I haven't posted exact figures here before, but I think you need to see the potential here. 2017 - $70,096.51, 2018 - $77,766.00, 2019 as of 6/30 - $42,357.99. On track to exceed $82K in passive income this year.

At your savings rate, you have $18,000 to $30,000 per year to invest! That's incredibly wonderful! You can get cash flow of 2% to 4% conservatively on that. (I get 4% to 6%, but I also have investments in individual bonds and preferred stock ETFs.) That's $360 to $1,200 passive income in the first year alone. More than double that in the second year, when you consider compounding. That may not seem like much now, but it becomes a snowball rolling downhill, getting bigger and bigger, picking up speed along the way.

With my skill set, I could not go out and get a job that pays what we get in passive income each year. Not even close.

 

[dirtbiker]

So questions first and then people can read my long explanation if they want to.
If all you have is passive income is there a place to invest it that is tax advantaged for retirement? How much of our income should we save per month for old age? Where should we put it? How large does our emergency fund need to be? Should we double up on any or some of the mortgages? We have between 1500-2500 a month to invest or save. Thank you in advance for any advice you may have.

We live off only passive income starting last year not by choice,my husband developed health issues and I take care of him and his parents. The issues prevent him working but do not come with large medical expenses thankfully. It feels weird sharing all this with strangers but I have no idea who else to ask. I have never been in charge of finances before but my husbands injury makes money management impossible. Honestly just paying the bills has been a new and not very pleasant experience. He had issues that we werent aware of and since he always handled the money things got a little messy before I took over. The learning curve has been intense and I remain fairly terrified that I will somehow bung it all up.

The first thing I did was pay off our credit cards,car and second mortgage by selling everything we didnt need which got us out of "bad" debt. I'm not ignorant of finances,its just that he was better at it and I was busy dealing with his parents and mine. However knowing what to do from here is what I worry about. There is so much conflicting advice online. My biggest fear is not having enough for "real" retirement and having no way to earn money at that point. Housewife ,it turns out is not a job skill that translates to a paying job well.

We are 49 and 50 married,no kids husband stopped working last year, I quit working in 2000. We make 9300 passive income through rentals per month + 2444 quarterly but we hope to be getting a further 1400 a month in the next year. We also have one work trade rental on our property. We have 330000 in stocks, dividend bearing,berkshire etc,40k in roth and we have 85000 in savings. We own outright a triplex and 4 single family and also a percentage in a family owned mixed use real estate,there is no mortgage on that one either. We have mortgages on 3 others. Our home which is 97000,another home 100000 and a quad plex 108000. Total payments are 2400,we pay over minimum. We expect to have them paid off in 15 years. We do have a lot of equity.
We have one equipment payment 650 a month interest free and no other debt except for home depot for rental repairs which when we use it we pay off before the interest period ends. 4400 a month goes to property/ tax insurance and the mortgages. We spend a further 3000 on living expenses including health insurance We dont currently travel much due to family issues,we dont have expensive hobbies,we dont eat out often,we have no vices except for large dogs and several other animals. We intend to downsize in the next 10 years and convert our home to a rental. Our home is a 40 acre farm with a 3/2 home,a 2/2 rental unit (work trade)and a 1/1 inlaw unit where my aunt lives. A studio could be added as well as a 2/1 with approximately 30000 invested if we did the work ourselves . The structures are there,wired and water they just need interior work done.

Our property adjoins my inlaws 27 acres with 3 living units(only one in use)which they bought 2 years ago so they could be close by. We care for them,although currently thats just keeping the property in shape and helping them with chores,bills,shopping,gardening,driving etc, not actual caregiving.

He will receive a small pension at 65 and s.s,I have no idea if I will get ss,its doubtful since my work history was very short.

We took some hard hits in the last year including a couple bad investments that cost us close to 100000 and damage to some rentals that cost 30000 of which insurance only covered a small portion. In addition both his parents and he and I had some medical stuff,nothing treatable for me and nothing incapacitating for his parents but he has been very much affected and so this too makes me nervous. Everything at this point does. Its like there is ominous music playing in the background on a daily basis.
My husband thinks I'm being over worried since we could move into one of the units on his parents property and rent our place for 2500 a month if we really needed to.
I feel like we should save as much as possible now so we arent caught by surprise again and so we can recoup our losses. It feels like we have been extraordinarily blessed to have come this far with what we have and at the same time I feel pretty wrung out ,its quite confusing to be honest.

If you got this far than thank you for you time and any advice you may give.

Welcome.

At first glance, it appears you are financially doing okay. Your passive income is higher than your expenses. You are adding to your net worth every month. However, because you have rentals, you will always have unexpected bills due to damage, maintenance, etc. But, if you're tucking away the extra income you have every month to cover this, you should be good.

What is your husband's prognosis? Is this going to be his new reality? Or is this a temporary setback? Is he expected to make a full recovery and get back in the work force? Or will you be living off of your current investments indefinitely?

It sounds like, besides real estate, the vast majority of your investments are in a brokerage accounts, rather than IRA, 401K, etc., right? That is not a tax-advantaged location for your investment. If you're continuing to put money into investments, consider an IRA for the tax shelter benefits. If your husband is able to get back to work and has the ability to put money into a 401K, do that, as it is also tax sheltered.

 

[gwraigty]

It sounds like, besides real estate, the vast majority of your investments are in a brokerage accounts, rather than IRA, 401K, etc., right? That is not a tax-advantaged location for your investment. If you're continuing to put money into investments, consider an IRA for the tax shelter benefits. If your husband is able to get back to work and has the ability to put money into a 401K, do that, as it is also tax sheltered.

With no earned income, OP can't contribute to an IRA/Roth IRA.

 

[ivinsfan]

One of the reasons we are asking about your DH's health is that if he is unable to hold any job he might well quality for SSI.

You have a lot of moving parts and people here knows the ins and outs of all this stuff. Just keep it one day at a time and remember there are no dumb questions.

 

[cathy63]

In addition to finding a financial advisor, I also think you should find a tax advisor. If you are managing the rental properties as a business and doing some of the work yourself, I am wondering if you could/should report that on Schedule C as self employment income instead of on Schedule E as rent. If you did that, then you could contribute to an IRA or Roth IRA. You'd also have to pay self-employment taxes and social security/medicare taxes, but you'd get the pass-through deduction. There are pros and cons and you need someone who can work the numbers both ways to advise you. Do it soon so you're not scrambling during the busy tax season next year.

 

[dirtbiker]

With no earned income, OP can't contribute to an IRA/Roth IRA.

I knew you couldn't contribute to an IRA if your only source of income came from equities and bonds and such. I somehow thought income from rental properties was different. But I checked and you are indeed correct. Thanks for pointing this out.

 

[imoldernu]

Delilah...

You've already made friends here...
Sorry I can't help with money advice..not my forte.

The way I see it, you need a friend. Someone to sit down with,and be an emotional backup, as well as someone to just be free with. I'd agree with the idea of a financial advisor, but someone that can offer understanding and compassion.

Not a churchgoer myself, but often times either a church or some other type of organization that brings people together. In our town, it could be the library, or one of the volunteer groups at the hospital or food pantry...

Sometimes just making a friend, or a having a relative to talk to.

Just reading your post brought an emotional reaction. We could sit down together with some pads of graph paper... some to work out the money, and some to work out the personal part. Time to sort out each item, and establish a "pecking order"... of what's important, and what can wait... A plan to deal with the emotional/psychological part that can be overwhelming.

Only you can work out the personal situation of dealing with the worries about your husband, but it would seem that some planned approach would be better than trying to deal with changes, one at a time, and compounding any upset.

My guess is that you can put the long term worries about the money situation and ability to retire on the side... Looks like you're there as far as $$$ safety goes. It's getting to the point of feeling in control that should be first... not mistakes that will happen along the way. Can't set the bar too high.

You'll get help here. Folks are really good and helpful, and thankfully, forgiving when we over step.

I hope this wasn't too personal... but as a dad to four boys who are older and younger than you, your post made me think of the times.. even today, when we go through the same kind of discussion.

Best wishes for a happy upcoming 40+ years. You're very smart, and you'll make it.

 

[HI Bill]

Wow, you do have a lot on your plate. A very complicated economic puzzle. Rents, taxes, tenants, repairs, property management, insurance, etc. At your age, and with your 'people' requirements alone, I'd personally start to figure out how to unwind (sell) your rental properties, one per year, to minimize the impact on taxes. You said that you'll have some of them paid off in 15 years. Do you still want to be managing properties at 65+ years of age?

"How much of our income should we save per month for old age?" Enough, that with your passive income, you'll be able to pay your bills. Sounds like you're already there, so the short answer for your current standard of living is that you don't really need to save any more, except perhaps to fund long term care or build up your emergency fund.

"Where should we put it?" I would go with the Bogleheads' three-fund portfolio. https://www.bogleheads.org/wiki/Three-fund_portfolio

"How large does our emergency fund need to be?" Usually people say 6 months to a year's worth of expenses. But with your rentals, I'd say that you need a substantial additional emergency fund to cover periods of non-rental, and periodic maintenance/repairs. I'm unclear on how many properties you actually have, and know nothing about their condition. That said, I'd build up at least a $40K fund to cover the potential periodic/emergency costs associated with the large number of rentals you have, should you elect to keep them.

For me, your financial and rentals picture is far too complicated (and would provide me too much stress). I sold my singular rental condo, and swore never again, to be a landlord! Whatever path you take, best wishes!

 

[Delilah]

None of my bills are automated yet, I am still so new at this that I wanted to be hands on every month. It helds to remind me not to spend money on stuff. It also tends to make me a little cranky but thems the breaks.

 

[gwraigty]

None of my bills are automated yet, I am still so new at this that I wanted to be hands on every month. It helds to remind me not to spend money on stuff. It also tends to make me a little cranky but thems the breaks.

Nothing wrong with manually scheduling bills for payment. That's how most of mine are done.

 

[HI Bill]

None of my bills are automated yet, I am still so new at this that I wanted to be hands on every month. It helds to remind me not to spend money on stuff. It also tends to make me a little cranky but thems the breaks.

I use Excel for my checkbook register. I have repeating rows that I copy each month for cable modem, association fees, monthly subscriptions, electricity, telephone, etc. All of these are on auto pay. Each month, when I receive the email with the auto pay amount, I double-check or correct the amount in the register. I also record each and every credit card transaction there. That way, I have minimal effort paying bills, save on postage, save on checks, and most importantly, save on time. But I'm still aware of how much I spend. At the beginning of every pay period, I add in the deposit, then after recurring expenses, add $800 to cover groceries, etc. Then, I happily move the rest to Vanguard! Paying myself first.

Writing and mailing checks scares me. With one check, if stolen, the person has everything they need to know about you, to clean out your account. Not secure at all. Carrying checks around with you is even more risky. Give me https:\\ anytime!

 

[pb4uski]

None of my bills are automated yet, I am still so new at this that I wanted to be hands on every month. It helds to remind me not to spend money on stuff. It also tends to make me a little cranky but thems the breaks.

One of the best things that I ever did financially was putting whatever I could on autopay. I still get statements and can look at the charges to make sure that they are legit... it is just that I don't have to worry about making a payment... the vendor pulls the amount due from my account when it is due.

The only thing I need to worry about is to make sure that there is enough money in the checking account to cover the draws by the vendors.

Some people feel more comfortable with using their bank's bill-pay to push payments to the vendors when they are due.... a little more work but not much more once the vendors have been set up. I use my bank's bill-pay for some bills (like my mortgage and car payments)... I can set it up to pay $x on the yyth of each month and then end the payments after zz payments have been made. So for example, I scheduled my car payments once for 60 monthly payments and haven't touched it since.... knowing that payments wi stop after the last payment is due.

 

[pb4uski]

.... If all you have is passive income is there a place to invest it that is tax advantaged for retirement? .... Thank you in advance for any advice you may have.....

Tax-deferred accounts like deductible IRAs are only worthwhile if your current marginal tax rate is higher than your marginal tax rate when you are retired. You can find out your current marginal tax rate by looking at the taxable income line on your 2018 tax return and the following table:

Tax Rate	Taxable Income
(Married Filing Jointly)
10%	Up to $19,050
12%	$19,051 to $77,400
22%	$77,401 to $165,000
24%	$165,001 to $315,000
32%	$315,001 to $400,000
35%	$400,001 to $600,000
37%	Over $600,000

From what you wrote I'm guessing that you are in middle of the 12% bracket. If that is the case then I don't think that tax-advantaged savings will do a for you.... but if you just invest in stocks in a taxable account then dividends and long-term capital gains are tax-free as long as you stay just below $78,750 of taxable income in 2019... so I think that is a good course for you if you are in the 12% bracket or lower.

Presumably when you are retired your income would be about the same other than the addition of social security... and at least 15% of social security would not be taxed and perhaps even more would be tax-free depending on your income.

 

[Delilah]

My husband handled the property repairs and we have a property manager. We have applied for ssdi for him. Currently we have a renter eho does work trade and he is doing any needed maintenance. Selling the properties would be pretty difficult and I dont see how investments would better the rent that we get plus the equity we hold. Also the area is on an upswing and my properties are likely to increase in value so I would prefer to wait to sell for at least 5 years. As to our main home,my husband built it from the ground up so selling it and disrupting his sense of place isn't an option right now. His injury makes him anxious over simple things and daily tasks,moving would be a huge stresser,we have lived here for 20 years.

 

[Rianne]

We live off only passive income starting last year not by choice,my husband developed health issues and I take care of him and his parents. The issues prevent him working but do not come with large medical expenses thankfully.

We do have a lot of equity.

We dont currently travel much due to family issues,we dont have expensive hobbies,we dont eat out often,we have no vices except for large dogs and several other animals.

My husband thinks I'm being over worried since we could move into one of the units on his parents property and rent our place for 2500 a month if we really needed to.

It feels like we have been extraordinarily blessed to have come this far with what we have and at the same time I feel pretty wrung out ,its quite confusing to be honest.

Delilah, I re read your OP. The above are very important points regarding your situation. This being one of the most important:
"The first thing I did was pay off our credit cards,car and second mortgage by selling everything we didnt need which got us out of "bad" debt."

You have common sense and savvy. The rest is just numbers. You are in a good financial situation. The other posters here are helpful with putting the pieces together regarding the numbers. It will all work out. Feel confident you are in control.

 

[Moemg]

Welcome ! You have a huge amount on your plate . Maybe consider a little help to make your life easier .