Hello from 56mga

[56mga]

I am new to this site and need advice. I am 55, married and ready to retire, but nervous about pulling the plug. I want practical advice from folks who have gone to the other side and survived(flurished).

 

[TromboneAl]

60mga

 

[bssc]

Hi all Welcome to the Boards

I would recommend running FIRECALC to see how your numbers work out. I would also search for some of the stories on this board who have retired. I think tha their success stories will make you less nervous.

 

[56mga]

Thx for the advice, I will try the search you recommended

 

[56mga]

I am 55 married and concerned over ability to retire. I have read postings with very impressive net worth. Your advice is really needed.

Heres the data:
Mortgage free (house value $650K)
Cash/Equity investments $550K
Pension (cash value) $110K (or $8K/yr)
Pension (cash value) $40K (or $2K/yr)
3 rental properties (net equity $850K) net yearly income $28K
annual combined family income approx $110K
living expenses are low (we spend approx 36K to 40K/yr)

I would like to retire and not have to sell the rental property. I am concerned that with a 4% draw down on investments that I will not have the retirement income I would like ($65K to $70K/yr).

Your comments, suggestions would be appreciated
Thx

 

[Gumby]

T-Al:

What a great picture! I have always lusted after old English sports cars. I had a TR6 when I first graduated from college (alas, gone long ago), and I would gladly take a TR3, MGA. Austin Healey 3000, or Jaguar XK 150.

for the OP

Sounds like you would be skating on the edge of practicality, unless you can free up some equity from the rentals or downsize the home. It appears that your cash return on the rental property is only about 3%. Might it not be best to sell it and invest the money in something more liquid with a better return?

 

[56mga]

Thx for the input. We are thinking of downsizing our home and putting an additional $200K into investments as a safeguard. the problem with selling the rentals is the capital gains tax (ooouch). Also, my rents are currently below market as I want long term family tennants. I could bump my income up by another 2K/yr atleast, however I run the risk of loosing good tennants.

Isn't there anyone who has retired on less than $1M and survived?

Do you know if the firecalc takes into consideration gov't pensions (old age and canada pension) which both my wife and I qualify for.

 

[56mga]

60mga
View attachment 2758

Thats a great picture, can I use it? Any thoughts on my retirement concerns?

 

[travelover]

Do you know if the firecalc takes into consideration gov't pensions (old age and canada pension) which both my wife and I qualify for.

There are a number of free comprehensive calculators available on line. I used the one from Fidelity to make my decision and it allows for pension and other income inputs. I'll let other speak for FIRECALC, as I did not use it.

 

[Getting short]

Hi 56 and welcome! In Advanced Firecalc, on the first page (How much will you spend?), at the bottom, you can increase or decrease the amount you will need per year. Just hit the decrease button and put in the amount that you will receive in pensions and when they will start.

 

[yakers]

61 Mga

My wife's first car was a 61 MGA.

About retirement: what about medical insurance? Could be the big issue.
And those costs look low to me since I live in a high cost area (southern Calif) but folks inlower cost areas do report living on that income.
There are separate issues about rental property income. It can be a nice source of income but unless you pay someone to manage the rentals it still looks like at least a part time job to me.

 

[56mga]

As I live in Canada, Health Insurance is not as big an issue. In addition to the above yearly income, both my wife and I qualify for OLd age and Canada Pension. If we start taking this early at age 62 I beleve that would provide and extra $12K per year which would reduce the demands on my savings. Im Looking at a retirement income of 60K to 70K per year.

 

[AltaRed]

As I live in Canada, Health Insurance is not as big an issue. In addition to the above yearly income, both my wife and I qualify for OLd age and Canada Pension. If we start taking this early at age 62 I beleve that would provide and extra $12K per year which would reduce the demands on my savings. Im Looking at a retirement income of 60K to 70K per year.

You can make Advanced FIRECALC work for you by providing the appropriate substitutions for CPP and RRSPs, e.g. RRSP = IRA, CPP=pension, and OAS=pension too. The program won't make adjustments for clawbacks though. It is also based on US market data, not Canadian TSX data, but for the most part you can just tweak returns by 1 percentage point or two to get performance equivalents.

If you really want to stick with a Canadian based calculator, try RRIFmetics.

 

[Darryl]

Well if your living the simple life with expenses at 36 to 40k a year you have it right now. If you're looking to move that to 65 or 70 looks like you are a little short, of course you need to deal with Health Insurance. Run Firecalc. I am very sure I will pull the plug with a number less than 100%.

 

[Meadbh]

the problem with selling the rentals is the capital gains tax (ooouch).

If you have accumulated a lot of equity in your rental properties, you could consider increasing the size of the mortgages and cashing in some of the equity tax free. Of course this would work best if interest rates were falling. Otherwise it would eat into your cash flow.

 

[Porkfat]

I "retired" at 56 and found the first year to be very difficult emotionally (I'm about to turn 58). If I had to do it over again, I would have sought the advice you seek. First, you need to run the numbers through Firecalc and get comfortable with your investment strategy. My wife and I have a financial counselor with whom we set very specific investment strategies and he is familiar with our use of Firecalc. The numbers do not lie, and frankly, you simply don't know enough to ever get 100% comfortable. You don't know how long you will live, what health and economic issues you will face (e.g., how will global warming effect your property and income) - you have to be emotionally comfortable with that uncertainty, and I found that takes some time to accomplish.

Also, ER means that you can do other things, it doesn't mean you'll just sit around. Determining what you want to do and getting comfortable with that direction can be difficult. I chose teaching as an important "retirement" activity and have found it personally rewarding, though you will barely cover your expenses. In addition, as I have a law degree (though I was in business most of my career), I am studying to become an arbitrator and mediator. At the same time, I am restoring an old sailboat and doing volunteer work, in part with Score, and exceptional mentoring organization for small business development.

All this being said, after about 16 months, I am just getting a bit comfortable with the lifestyle, and have no regrets leaving the rat race. My health is great, my kids educated and my mortgage is paid and you will be amazed at how little money it takes to live very comfortably when you are not in debt and not raising kids. Good Luck!

 

[56mga]

Thx for the ncouragement.

I am nervous about the money, however I do have a swack of equity in my rental houses (approx$700K) and in my home (approx $700K) on top of my savings.

I am already accumulating projects for retirement.I have started restoring my 56 MGA and do construction as a side line.(helps pay for trips)

I will rerun Firecalc until I cmfortable.

Thx again

 

[AltaRed]

The only thing I find risky in your portfolio is the amount of net worth (equity) tied up in real estate. Bad economic times can disproportionately devastate your RE equity and shrink your rental income. Canada's RE slump is going to happen sooner or later. Despite the CG tax, you should not let the tax tail swing the dog. Consider broadening your diversification by lightening up a bit on the RE and putting the proceeds into a good value/dividend based index ETF or similar.

 

[56mga]

Thx for your comments. i believe we are already experiencing a bit of a slump, however, my current rents are about 100 to 200/month below the average, so I have a bit of room to absorb a decline in rents. I feel over the long run theses properties will continue to appreciate in value and the equity will grow as I put rental income against the debt. They will be a safety net incase the market collaspses.

Thx Brian