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HI from Think4u
Old 09-04-2008, 08:47 AM   #1
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HI from Think4u

I am deeply concerned about my retirement.
I,m 50 years old.
I am married with 2 childern and are below the age of seven.
My wife workes part time earning 12k per year and I earn 74k per year.
I have a 380k 30 year mortgage with 29 years left on it, which I desire to payoff as soon as possible.
I have 260k in retirement. My total networth is 490K.
I have two rental properties with negative cash flow.
One has a 15 year mortgage with 9 years left til it is paid off and the other is a 30 year mortgage with 27 years left on it.
I am moving 200k from my retirment to a self directed Real Estate IRA to buy more rentals.
And I am looking at utilizing the accelerated mortgage program with a HELOC loan to pay off everything.
I want the retire with at lease 2.5 mil before age 62.

Is it possible..

Please Help!!!
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Old 09-04-2008, 10:27 AM   #2
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Quote:
Originally Posted by think4u View Post
I am deeply concerned about my retirement.
I,m 50 years old.
I am married with 2 childern and are below the age of seven.
My wife workes part time earning 12k per year and I earn 74k per year.
I have a 380k 30 year mortgage with 29 years left on it, which I desire to payoff as soon as possible.
I have 260k in retirement. My total networth is 490K.
I have two rental properties with negative cash flow.
One has a 15 year mortgage with 9 years left til it is paid off and the other is a 30 year mortgage with 27 years left on it.
I am moving 200k from my retirment to a self directed Real Estate IRA to buy more rentals.
And I am looking at utilizing the accelerated mortgage program with a HELOC loan to pay off everything.
I want the retire with at lease 2.5 mil before age 62.

Is it possible..

Please Help!!!
Anything is possible. Is it likely? Only the Shadow knows.

Ha
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Old 09-04-2008, 10:47 AM   #3
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Originally Posted by think4u View Post
I am deeply concerned about my retirement...I want the retire with at lease 2.5 mil before age 62.

Is it possible..
Based on what you've told us, your goals are not realistic barring an inheritance, a sustained extreme bull market or some other unlikely event. Check out Firecalc to help you do some reality checking.

That said, you desperately need a plan to make the most of what you have. The FAQs and Archives have some reading suggestions you might wish to consider.

At least you sound like you are coming to grips with your situation and ready to do something about it. My guess is that you'll need to defer retirement beyond age 65.
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As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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Old 09-04-2008, 11:17 AM   #4
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I don't want to rain on your parade, but I think that your goals are VERY ambitious. With an income of $86K, 2 young children, 2 rentals with negative cash flow, and 1 very substantial mortgage on your home, you must not have a lot of money left at the end of the month to add to your retirement stash. Therefore, you are basically counting on the growth of your current investments (rentals and $260K in retirement savings) to reach your goal. Not knowing the current value of the rentals and their location, it's a bit hard to say for sure, but I think you are being overly optimistic.
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Old 09-04-2008, 11:45 AM   #5
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According to my calculations, you will be hard pressed to make it.

The accelerated HELOC payments system significantly increases your risk. You can accomplish the same thing outside of their system and without paying $3,500 for the spreadsheet they provide you. I don't recommend them to my clients

A couple of questions that may influence your outlook.

1. How attached are you to your current home?

That 380k mortgage must be consuming a large portion of your take home pay. If you could downsize your home that may free up a lot of income to either save more for retirement, payoff your new, smaller mortgage with, or get your rentals to a cash flow positive situation.

2. Do either of your rentals have significant equity in them?

If they are negative cash flow and resulting in a loss even before you account for depreciation, you may do well to sell the one with the longer mortgage (if it has significant equity). The equity could then be applied to either your current mortgage or the new, smaller mortgage pointed out above.

3. Any chance for significant income increase?

Again, your current expenses must be chewing your combined take home pay as it stands today. Even another $20,000 a year could make a difference.

4. Any substanstial windfall/inheritance expected in the next 12 years?

I hate to count on someone else's demise to plan for one's retirement, but if you have a relative that has substantial assets that will be left to you that would significantly change the outlook.


Uncle Drew
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Old 09-04-2008, 05:20 PM   #6
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Is your wife planning to produce more income as the kids grow? Is she equipped to get a 50K a year job? That would make a big boost to the nest egg. On the rental with 9 years remaining on mtg what is the equity? How negative is the cash flow? There is a big difference between $20 a month and $520 a month.

Be careful with self directed IRA and real estate. You have to be hands off and not the landlord as I understand it.
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Old 09-04-2008, 07:23 PM   #7
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Welcome to the forum!
I'll leave the detailed financial analysis up to the experts, but IMO it looks like you will have a tough time meeting your goals- your current cash situation is too thin each month to allow you build a nest egg. If it were me, I would try to unload the equity in the rental homes, and get it invested in something safe for the long haul. Re-allocate what you were losing on the rental houses each month into your 401K. You need to get cash working for you sooner than later, at 50 you are running out of time to enjoy the benefits of long-term compund interest. Good Luck.
All the Best,
BWW
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Old 09-05-2008, 12:47 AM   #8
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I think you can have a very nice retirement after you are debt free. You don't mention anything about paying off the mortgages early so plan on retiring around your 79th birthday. Yes, I sound like an old curmudgeon but IMO debt is not usually the ticket to FIRE.
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Old 09-05-2008, 10:23 PM   #9
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And I am looking at utilizing the accelerated mortgage program with a HELOC loan to pay off everything.
Stay away from the accel mort program, IMHO. Especially if it's one of those that charges $3500 or so for the software and presents it as if you're going to pay it down extremely early by taking advantage of the "float" (although they don't put it that way).

They tell a lot of lies about "prepaid interest" and how "conventional" mortgages are some kind of rip off that "front load" the interest. It goes on and on.

It's a lot of financial flim flam that really all depends upon large positive cash flow to aggressively prepay principal, which is something you can do yourself without their software or the fee associated with refinancing into the HELOC, etc. But they won't tell you that, of course.

Also, you can take advantage of the float by running as much as you can through a credit card (preferably one with a cash reward rebate) and keep that monthly amount in some interest bearing account.

Not the worst scam out there but surely a rip off.
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