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Late early retirement
Old 04-13-2016, 05:33 PM   #1
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Late early retirement

Hi!

I'm 57 and am planning to retire just prior to my 60th birthday. I live in SoCal with my wife and extended family, including 6 grandchildren. Relocation is not a possibility.

My ER plan involves creating passive cashflow streams using real estate and dividend income to cover our spending. My expected withdrawal rate from IRA/401k is 0-2%

Healthcare is the biggest hurdle. I was going to keep our mortgage for the tax deduction, but realized from reading this site that the MAGI for ACA includes every form of income known to man and the extra income needed to pay the mortgage (for which no deduction is allowed) will put us well over the 4x Federal Poverty Level (FPL) and will disqualify us from any subsidies. So new goal: pay off the mortgage!

I'm looking forward to learning more from this site and will post if I have something worthwhile to share or ask. I'm grateful this site exists and for the collective wisdom available here.

Best regards,
Bruceski
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Old 04-13-2016, 08:06 PM   #2
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Welcome! Your ER will be here before you know it. I've been reading these boards forever and posting almost as long, and I still learn something new here almost every day.
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Old 04-13-2016, 08:49 PM   #3
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Welcome, and I like your apt name. If you can live on just 2% SWR or less, could you retire now and splurge a bit and live on 2.25% SWR in order to pay for health insurance for a relatively few years until Medicare? Like you, we're on a "gazelle intense" (Dave Ramsey term) march to pay off the $290K mortgage. I'm 50, DW is 53 and we calculate 5 years to pay it off, at which time life gets interesting with several new options to allow FIREing if we choose. Good luck!
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Old 04-13-2016, 09:20 PM   #4
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Welcome aboard Bruce, it's good to see the "finish line" eh?
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Old 04-13-2016, 09:46 PM   #5
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Welcome Bruceski44.

Your thinking about the cashflow needs to support a mortgage are the same I had. We were already paying extra towards the mortgage - but it became a higher goal when I realized that we'd easily be able to stay under the ACA MAGI numbers if we didn't have a mortgage.

Like you - we have some income from real estate, and we withdraw the rest from our savings... The ACA tax credits (sometimes called subsidies) make a big difference in our cashflow - allowing us to withdraw less.

That said - retiring a SoCal size mortgage is challenging. It took a big effort to do so. I made the final payment on the mortgage a few weeks before I retired. One option we looked at was to pay down the mortgage significantly, then refi before retiring - with a lower monthly payment. Fortunately, we had some bonuses come our way that allowed us to just pay it off.
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Old 04-14-2016, 09:19 AM   #6
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Thanks to all for your hospitality and encouragement.

I probably could go ER now, but would like a little bigger cushion. With rising HC costs, a little extra insurance is good.

It saddens me that we are basically planning to limit our income potential in order to control HC costs. I don't want to plan to be poor. I just want to maintain my existing lifestyle, which is not extravagant. Worse yet, it really bothers me that there is a single FPL for the lower 48 and DC. Does anyone really think the cost of living is the same throughout our country? COL even changes pretty widely amongst different counties in a single state!

I probably should change the subject now, so thanks again.
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Old 04-14-2016, 09:29 AM   #7
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Quote:
Originally Posted by Bruceski44 View Post
Thanks to all for your hospitality and encouragement.

I probably could go ER now, but would like a little bigger cushion. With rising HC costs, a little extra insurance is good.

It saddens me that we are basically planning to limit our income potential in order to control HC costs. I don't want to plan to be poor. I just want to maintain my existing lifestyle, which is not extravagant. Worse yet, it really bothers me that there is a single FPL for the lower 48 and DC. Does anyone really think the cost of living is the same throughout our country? COL even changes pretty widely amongst different counties in a single state!

I probably should change the subject now, but thanks again.
Welcome aboard. And you're not late to ER, anything before FRA is ER IMO.

Forgive me if I am misinterpreting your POV. While COL certainly varies from place to place, we're all free to live wherever we choose. Should someone who chooses to live in a high COL city get a greater "break" than someone who chooses to live in a lower COL city/state?

Would you make your COL argument for federal taxes too? I don't think most taxpayers would support tax breaks based on other taxpayers chosen COL city/state.

HC is expensive, no way around it - until we come to grips with the costs themselves. Technology may bring costs down in the decades ahead, we can only hope...
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Old 04-14-2016, 09:42 AM   #8
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Quote:
Originally Posted by Bruceski44 View Post
Hi!

I'm 57 and am planning to retire just prior to my 60th birthday. I live in SoCal with my wife and extended family, including 6 grandchildren. Relocation is not a possibility.

My ER plan involves creating passive cashflow streams using real estate and dividend income to cover our spending. My expected withdrawal rate from IRA/401k is 0-2%

Healthcare is the biggest hurdle. I was going to keep our mortgage for the tax deduction, but realized from reading this site that the MAGI for ACA includes every form of income known to man and the extra income needed to pay the mortgage (for which no deduction is allowed) will put us well over the 4x Federal Poverty Level (FPL) and will disqualify us from any subsidies. So new goal: pay off the mortgage!
Welcome!

If you only need 0-2% from your IRA/401K, you should be able to manage the health insurance costs (if there's a decent balance in them) and still remain south of a 4% withdrawal rate.

One possibility, and current taxes and/or current non-retirement assets may not allow it, is to do Roth conversions so the money you later withdraw from your IRA will not hit your MAGI. (Of course, if you don't yet have a Roth I believe you have to wait 5 years before you can withdraw the money tax free, even over age 59.5.) It might not be a good idea if you are currently in a much higher tax bracket than you will be in retirement, even if you lose ACA subsidies.

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Originally Posted by Midpack View Post
Forgive me if I am misinterpreting your POV. While COL certainly varies from place to place, we're all free to live wherever we choose. Should someone who chooses to live in a high COL city get a greater "break" than someone who chooses to live in a lower COL city/state?
Maybe. But they do have special tables for Alaska and Hawaii, IIRC. Don't they also have the right to choose to live in a region with a lower cost of living?
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Old 04-14-2016, 09:52 AM   #9
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Maybe. But they do have special tables for Alaska and Hawaii, IIRC. Don't they also have the right to choose to live in a region with a lower cost of living?
Agreed, they got it right for 48 of 50 states, not the other way around IMO. I can only imagine why they made an exception for AK and HI...but let's not.
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Old 04-14-2016, 10:11 AM   #10
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Originally Posted by Bruceski44 View Post
... Worse yet, it really bothers me that there is a single FPL for the lower 48 and DC. Does anyone really think the cost of living is the same throughout our country?...
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Originally Posted by Bestwifeever View Post
... I've been reading these boards forever and posting almost as long, and I still learn something new here almost every day.

Yes, I too, learn something new here almost everyday. Today (and it's still early) I learned what (1) "FPL" stands for. I even learned that (2) there is a single FPL for the lower 48 and DC and that (3) Bruceski44 is really bothered by it.
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Old 04-14-2016, 11:28 AM   #11
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There are choices and then there are tough choices. As much as I want to move away from here, it would mean leaving my wife and family behind. And half of everything I own :-) That's not really a choice.

This article
Obamacare Optimization in Early Retirement - Go Curry Cracker!Go Curry Cracker!
shows how the ACA premiums vary by more than 2x from MN to CA. Does the COL really vary by that much? Are people twice as healthy in MN than they are in CA?

Ziggy29, thanks for the tip about converting to Roth IRA. Are you sure Roth withdrawals won't affect MAGI? When I look at what contributes to MAGI, there's the list of everything, then at the bottom the ominous phrase "Other Income" which includes anything they may have left out. Please tell me more about how you know Roth is exempt.
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Old 04-14-2016, 12:50 PM   #12
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Originally Posted by Bruceski44 View Post
Ziggy29, thanks for the tip about converting to Roth IRA. Are you sure Roth withdrawals won't affect MAGI? When I look at what contributes to MAGI, there's the list of everything, then at the bottom the ominous phrase "Other Income" which includes anything they may have left out. Please tell me more about how you know Roth is exempt.
http://laborcenter.berkeley.edu/pdf/..._summary13.pdf

Note that that *qualified* Roth distributions (over 59.5, at least 5 years with a Roth) are not income included in the AGI, nor is it any of the "add backs" listed here.

Qualified (there's that word again) Roth distributions are definitely not included in MAGI for the purposes of ACA.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
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