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Old 01-15-2008, 10:59 PM   #1
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I've been lurking for about a month...

Hi,

I'm 42 years old, as is my DH, and I'm here to learn more about RE. DH is pretty financially saavy, so I pretty much let him take the lead. I know where our money is (it's all very meticulously tracked on a Quicken program, down to each Visa receipt!) but the bulk of the financial planning and decision making is done by him. I am asked my opinion, but normally I just trust what he is doing with our money. My goal this year is to become more informed about our financial well-being because I know he would like that!

We haven't set a specific date or amount for RE. We have made it a goal this year to attempt to figure that out. Right now, we're probably aiming for 52-55. It would be nice if we could RE at 52, as I would like DH to be able to get out of the rat race. However, it's also difficult to maintain that long term focus when living day to day. We've always been very good savers, and we don't spend much on the little things but tend to buy big ticket items (more on that in a minute). Fortunately, my DH has a well paying job which has enabled us to save good money in the past few years. I work PT, about 20 hours per week. I max out my 401k at my job and also take out extra to pay the tax man so we don't get hit with a penalty at the end of the year. It's always been DH's position to owe the govt just enough to not get hit with a penalty.

We bought our first home at age 28 and lived in it for about ten years. We recently tore it down and built a new home on the same property, to accomodate our larger family of four (went from 1,000 to 2,200 square feet) so we have a substantially larger mortgage. In 2007 we bought a second home, waterfront, which will set us back on the RE road, but we've been enjoying it and hope it will appreciate over the years and be a sound investment as well as a place to have fun and make good family memories.

Here are the vitals:

Net worth: Approximately 1.5 million, if we cashed out and sold our homes in today's market. About 1.1 million of the net worth is liquid assets in 401(k)s, IRAs, money market, a few individual stocks, etc. The other $500,000 is equity in the two houses. Oh, the 1.1 millon also includes approx. 120,000 in 529's for our two children.

Our biggest expenses right now are our mortgage payments. One is 5.375% 30 year fixed of which we owe $410,000 (approx. value in today's market is about $725,000). The other house is at 6%, also 30 year fixed, and we owe around $310,000 (we purchased in spring '07 for $400,000). We pay $650 extra on our primary home mortgage each month, max out our 401k's, save $1,000 monthly in 529's and attempt to save an additional $500. We don't always do that. My DH also receives a bonus every year, and we invest 95-100% of that.

We have no debt, other than the mortgages and, as of December, we own two vehicles. This is the first time in our lives we've had more than one car.

We probably won't buy a boat for some time (probably the only people on the lake that don't have a boat!) because we're still exhaling from the home purchase.

I'll be nosing around and hoping to learn more about RE and setting some goals for it. I've already realized that I have much to learn. I still don't know what SEPP's and 72ts are. Neither of us will have a pension and my DH doesn't think we should count on any SS, so I think we have alot of savings to do to make this happen for us.

That's it for now and thanks in advance for what I expect to learn here.
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Old 01-16-2008, 05:01 AM   #2
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Welcome to the boards Goodwife

You sound like you are well on your way to an early retirement, especially the key part of tracking your expenses religiously. Once you know how much you need and want to spend figuring out how much need to retire is much easier.

The obvious question is the second home purely a vacation home or is their potential for renting it? Yes, I think it would set your retirement back by a bit, but hey ... you don't get a do over in life.

One think that was puzzling is why would you be paying extra $650 month on your principal mortgage instead of paying down the more expensive 6% vacation home mortgage?

SEPPs and 72(t)s congratulation of all the acronyms on the board you identified a couple which would be very helpful for to understand as an early retiree. SEPP (Substainial Equal Periodic Payment) is a means for you to tap into your IRAs or other retirement savings before the normal age 59.5. 72(t) is the tax code section governing these withdrawals. I can't find the forum link but here is great website Welcome to 72t on the Net
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Old 01-16-2008, 02:28 PM   #3
Confused about dryer sheets
 
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Thank you for the welcome, clifb.

Unfortunately, there is no potential for renting our vacation home. The county we are in doesn't allow short term rentals.

I'm not sure why we are paying down the lower interest mortgage. Maybe it was just habit and we haven't changed yet. When DH returns I'll have to ask him that. I'm also wondering whether we could refinance now and get down to 5.75 on the second place. I've seen 30 year fixed rates out there for that recently, but I also know they bump up the rate a bit on a non-primary residence.

Thanks for the link to the info. about 72t as well. I do appreciate it.
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Old 01-16-2008, 05:11 PM   #4
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I'm also wondering whether we could refinance now and get down to 5.75 on the second place. I've seen 30 year fixed rates out there for that recently, but I also know they bump up the rate a bit on a non-primary residence.

There used to be an old rule of thumb that to refinance, one ought to be able to knock at least one point off the interest rate (or was it two points) in order to make the refi costs (appraisals, loan fees, doc fees, etc) worthwhile. So to go from 6% to 5.75% doesn't seem worth it. Unless you find a deal where they will refi with NO closing costs to you. Or can find a 5% or lower rate.

I know I did that once, but it was 12-14 years ago. The mortgage game has changed since then.

Other than that, welcome to the forums. There is lots useful here, and I am always learning something. Lots of interesting discussions too.
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Old 01-16-2008, 08:11 PM   #5
Confused about dryer sheets
 
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There used to be an old rule of thumb that to refinance, one ought to be able to knock at least one point off the interest rate (or was it two points) in order to make the refi costs (appraisals, loan fees, doc fees, etc) worthwhile. So to go from 6% to 5.75% doesn't seem worth it. Unless you find a deal where they will refi with NO closing costs to you. Or can find a 5% or lower rate.

I know I did that once, but it was 12-14 years ago. The mortgage game has changed since then.

Other than that, welcome to the forums. There is lots useful here, and I am always learning something. Lots of interesting discussions too.
Hi RRobert,

Thanks for the welcome.

I figured with closing costs of about 1,000 (which is a little bit more than what we had on the original loan), I would recover the costs in about a year and a half. And since we plan on holding onto the property for quite a while, doesn't that make sense? Am I figuring this correctly?
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Old 01-16-2008, 10:06 PM   #6
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Oh, poo.

Is there a forum for poor old guys who may have to live under bridges?
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Old 01-16-2008, 11:21 PM   #7
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Oh, poo.

Is there a forum for poor old guys who may have to live under bridges?

If so, I'll probably be there with you!
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Old 01-16-2008, 11:23 PM   #8
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My federal credit union is currently offering 5.675% for a 30 yr fixed. It's not normally the best place for rates in town, but usually fairly competitive. Their 15 yr rates are at 5%. I'm looking to sell, not refi or else I'd consider doing the 15 yr. I'm currently at 6.5 fixed on my 30 yr.
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Old 01-16-2008, 11:58 PM   #9
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Hi RRobert,

Thanks for the welcome.

I figured with closing costs of about 1,000 (which is a little bit more than what we had on the original loan), I would recover the costs in about a year and a half. And since we plan on holding onto the property for quite a while, doesn't that make sense? Am I figuring this correctly?
I got out my calculator and on a $310000 balance even 1/4% does add up fast. Yes, if you only have $1000 refi cost, you would recover that in little over a year. (It's been over a decade since I had a mortgae so I am not used to the magnitude of mortgage balances nowdays!)

Refi would be a good move for even that 1/4% on rate. If you can find 3/8% rate cut, then even better. Just be sure to nail down all closing costs involved. And look around and see if anyone does offer a no-cost refi that still cuts your mortgage rate. I think they do exist, and you may luck out and find one.
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Old 01-17-2008, 10:55 AM   #10
Confused about dryer sheets
 
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Oh, poo.

Is there a forum for poor old guys who may have to live under bridges?
Sorry to be obtuse, but what are you saying?
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Old 01-17-2008, 10:57 AM   #11
Confused about dryer sheets
 
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My federal credit union is currently offering 5.675% for a 30 yr fixed. It's not normally the best place for rates in town, but usually fairly competitive. Their 15 yr rates are at 5%. I'm looking to sell, not refi or else I'd consider doing the 15 yr. I'm currently at 6.5 fixed on my 30 yr.
Thanks for the information. I periodically check bankrate.com but haven't checked rates in a few weeks. I imagine they have gone down a bit. Good luck on selling your place.
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