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Old 11-01-2014, 03:51 PM   #21
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All great points and questions... EastWest! . I think there is something in my 401K plan which allows me access at 55 without penalty if I retire before 59.5. My inheritance would put me way over the top, but hope my parents live a very long time. I came up with about $1,000 to $1,200 for healthcare premiums as well before Medicare and after retirement. Thanks for the conversation and encouragement; this is a great forum site!
Be real sure that your 401K plan will allow you to take tax penalty free withdrawals before age 59 1/2. I am so glad I had enough cash planned to last until 59 1/2 hits (I am 59 now), because my 401K plan had so many rules that it was virtually useless to stay in the plan until 59 1/2 (I was 56 at ER). It worked out for me, since I was able to grow my funds with the flexibility that an IRA provides versus if I had stayed in the 401K I would not have been able to grow my funds. My best advice: Make a detailed plan using one or more of the tools mentioned by other posters such as the Fidelity Planner, or spreadsheets, and don't forget to plan for contingencies!! I had to replace my AC about 4 months into my ER!! Good Luck.
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Old 11-01-2014, 11:05 PM   #22
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Take a deep breath!

You're looking 5 years into the future. That's a lot of time to learn how to save & invest optimally and understand & reduce your expenses. There's a lot to learn on how to draw down from your savings without running out in your lifetime. You're in good company here. Go slow. Be deliberate. All the best.
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Old 11-02-2014, 01:05 AM   #23
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My gut says you definitely should work those next 5 years.
As for the 2 house idea, would be fine if you had 2 MM or more. Its something I have thought about, but the extra expense of a second house (~10K/yr) is a big thing.
One way to possibly make it work, would be to rent out the HI house for 6mo/yr via a property manager, where the renting would cover all the costs (taxes,repairs,elec,water,alarm,grounds keeping, etc) , and you use it the other 6 months, or 3 months on and 3 months off type of timing.
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Old 11-02-2014, 09:58 AM   #24
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Be real sure that your 401K plan will allow you to take tax penalty free withdrawals before age 59 1/2. I am so glad I had enough cash planned to last until 59 1/2 hits (I am 59 now), because my 401K plan had so many rules that it was virtually useless to stay in the plan until 59 1/2 (I was 56 at ER). It worked out for me, since I was able to grow my funds with the flexibility that an IRA provides versus if I had stayed in the 401K I would not have been able to grow my funds. My best advice: Make a detailed plan using one or more of the tools mentioned by other posters such as the Fidelity Planner, or spreadsheets, and don't forget to plan for contingencies!! I had to replace my AC about 4 months into my ER!! Good Luck.
Great advice... my employer does have the specifics about 401k withdraw at 55 posted on our company website. Here is where my head really begins to spin. When I do retire, do I roll it over to an IRA, or keep some of it with the Principal Group which manages my employer's 401K. I understand the tax ramifications. I don't hold on to my company stock when I receive it, so there is no special tax treatment there in capital gains treatment. I do have a financial adviser through the Principal Group, but with being in a 401K, investments choices are limited to the plan. However, at retirement, I will be very confused and dizzy to go from there with this portfolio that grew... to my surprise and dumb luck.
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Old 11-02-2014, 10:08 AM   #25
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Take a deep breath!

You're looking 5 years into the future. That's a lot of time to learn how to save & invest optimally and understand & reduce your expenses. There's a lot to learn on how to draw down from your savings without running out in your lifetime. You're in good company here. Go slow. Be deliberate. All the best.
Thanks for the guidance! I think reducing expenses is a major key as well. The area that I want to learn more is how to generate income from my portfolio once my work income stops... since the shift seems to change from investment growth to investment income stream need. It seems wise to invest in multiple ways to receive income stream at retirement including rental property. Drawing 4% from the principle sounds safe and common, but I'm sure people are doing a lot more to develop retirement income streams. I'm very interested to hear what others seem to be doing.
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Old 11-02-2014, 10:51 AM   #26
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Originally Posted by Kauai bound View Post
Great advice... my employer does have the specifics about 401k withdraw at 55 posted on our company website. Here is where my head really begins to spin. When I do retire, do I roll it over to an IRA, or keep some of it with the Principal Group which manages my employer's 401K. I understand the tax ramifications. I don't hold on to my company stock when I receive it, so there is no special tax treatment there in capital gains treatment. I do have a financial adviser through the Principal Group, but with being in a 401K, investments choices are limited to the plan. However, at retirement, I will be very confused and dizzy to go from there with this portfolio that grew... to my surprise and dumb luck.
The following is my understanding, but I did not do this, so I could be wrong (and someone please correct me so I know).
If you retire at less than 59.5, you will have to keep a large portion of your 401K in the 401K, possibly all of it, because if you roll it over to an IRA, then you will pay penalties for early withdrawal from the IRA.
You are allowed early withdrawal from some 401K's without the penalty.
Some 401K's only allow a single roll-over.
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Old 11-02-2014, 11:06 AM   #27
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The following is my understanding, but I did not do this, so I could be wrong (and someone please correct me so I know).
If you retire at less than 59.5, you will have to keep a large portion of your 401K in the 401K, possibly all of it, because if you roll it over to an IRA, then you will pay penalties for early withdrawal from the IRA.
You are allowed early withdrawal from some 401K's without the penalty.
Some 401K's only allow a single roll-over.
Good conversation Sunset. I know the important point is that we have to know what we are doing with our 401K portfolio when we retire to prevent income tax trigger and the early withdrawal penalty. I do know in my plan, 59.5 is the age that you can withdraw without the 10% penalty. I think in my plan, you can start to withdraw at 55 without the 10% penalty if I retire, but I think there is more to it with that option...maybe a required percentage withdrawal rate each year for a certain period of time and duration?
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Old 11-02-2014, 11:18 AM   #28
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Thanks for the guidance! I think reducing expenses is a major key as well. The area that I want to learn more is how to generate income from my portfolio once my work income stops... since the shift seems to change from investment growth to investment income stream need. It seems wise to invest in multiple ways to receive income stream at retirement including rental property. Drawing 4% from the principle sounds safe and common, but I'm sure people are doing a lot more to develop retirement income streams. I'm very interested to hear what others seem to be doing.
If you have not read it yet there is a good book called Your Money or Your Life. It doesn't have any good, specific investment advice, but the concept is to keep reducing recurring expenses and increasing passive income until you reach the crossover point. At my husband's and my ages, with a financial plan for covering 50 more years, every $1K a year we shave off our annual expenses means needing $50K less in total retirement funding, so with our expenses that was easier to do than working full time longer.

We have a long list of things we can do to increase our passive / semi-passive income and decrease our expenses. Every week we just knock a few more off the list. I have a spreadsheet with hundreds of items and calculate the 10 year ROI for each one and we are working our way down the list, knocking off the highest ROI items, week by week. Last month I cancelled Hulu Plus and used my Bing rewards for Amazon gift certificates instead, got our energy bill lower than the same month the year before, eliminated some business checking and savings fees, moved some money out of cash to CD ladders, optimized the domain and hosting costs for our businesses and a few more things. The October total came to over $1k year in improved ER / semi-ER cash flow, either by cutting costs or increasing income. Over 50 years there's another $50K potential improvement in retirement funding.

If you've always been on top of your investments and expenses this won't help, but we sure weren't. We've still got a lot of improvements to make. For retirement income streams we have a couple of hobby businesses, pensions, SS and our investment portfolio income, which is invested in relatively conservative investments. And long term our house has appreciated more than inflation.
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Old 11-02-2014, 11:46 AM   #29
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If you have not read it yet there is a good book called Your Money or Your Life. It doesn't have any good, specific investment advice, but the concept is to keep reducing recurring expenses and increasing passive income until you reach the crossover point. At my husband's and my ages, with a financial plan for covering 50 more years, every $1K a year we shave off our annual expenses means needing $50K less in total retirement funding, so with our expenses that was easier to do than working full time longer.

We have a long list of things we can do to increase our passive / semi-passive income and decrease our expenses. Every week we just knock a few more off the list. I have a spreadsheet with hundreds of items and calculate the 10 year ROI for each one and we are working our way down the list, knocking off the highest ROI items, week by week. Last month I cancelled Hulu Plus and used my Bing rewards for Amazon gift certificates instead, got our energy bill lower than the same month the year before, eliminated some business checking and savings fees, moved some money out of cash to CD ladders, optimized the domain and hosting costs for our businesses and a few more things. The October total came to over $1k year in improved ER / semi-ER cash flow, either by cutting costs or increasing income. Over 50 years there's another $50K potential improvement in retirement funding.

If you've always been on top of your investments and expenses this won't help, but we sure weren't. We've still got a lot of improvements to make. For retirement income streams we have a couple of hobby businesses, pensions, SS and our investment portfolio income, which is invested in relatively conservative investments. And long term our house has appreciated more than inflation.
Great advice... much appreciated!! I just ordered "Money or Your Life" on Amazon. I'm buying a lot of the books on the recommended list on this forum site as well at Amazon - used book prices. You see, I'm learning to cut expenses....lol! - thanks again and well received advice... love this forum site!
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Old 11-02-2014, 12:00 PM   #30
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Great advice... much appreciated!! I just ordered "Money or Your Life" on Amazon. I'm buying a lot of the books on the recommended list on this forum site as well at Amazon - used book prices. You see, I'm learning to cut expenses....lol! - thanks again and well received advice... love this forum site!
If you really wanted to cut expenses, you could borrow the books for free from your local library, and if they don't have the book they can do an inter-library loan of the book from another library.
After all your taxes are paying for the library, so make use of it
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Old 11-02-2014, 01:00 PM   #31
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I like having books I can mark up and dog ear so I go to thrift shops and used library books sales:
Book Sale Finder

I think sooner or later almost every book I paid $20 for on Amazon has showed up at the library sales, plus a lot of cool old books with forgotten knowledge.

Instead of buying trendy urban homesteading books on Amazon for $20 each, I buy old home economics and gardening books for a quarter with the same information, like how to make soup stock from scratch, grow sprouts in a mason jar or set up a windowsill herb garden. Green, more sustainable living has become a hobby for us these days, as well a big money saver.
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Old 11-02-2014, 01:13 PM   #32
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Originally Posted by Kauai bound View Post
Thanks for the guidance! I think reducing expenses is a major key as well. The area that I want to learn more is how to generate income from my portfolio once my work income stops... since the shift seems to change from investment growth to investment income stream need. It seems wise to invest in multiple ways to receive income stream at retirement including rental property. Drawing 4% from the principle sounds safe and common, but I'm sure people are doing a lot more to develop retirement income streams. I'm very interested to hear what others seem to be doing.
Passive Income Ideas:
- Vanugard Managed Payout Funds

- Single Premium Immediate Annuities (SPIA's) - after interest rates rise some

- Rental Real Estate (with or w/o outsourced Property Management)

- Pensions

- Social Security

- RMDs from retirement accounts after age 70 1/2

- Dividend paying stocks and mutual funds

- Peer to Peer (P2P) lending (ie LendingClub Prosper etc)

- SWR withdrawals from total return investments

-gauss
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Old 11-02-2014, 01:32 PM   #33
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Passive Income Ideas:
- Vanugard Managed Payout Funds

- Single Premium Immediate Annuities (SPIA's) - after interest rates rise some

- Rental Real Estate (with or w/o outsourced Property Management)

- Pensions

- Social Security

- RMDs from retirement accounts after age 70 1/2

- Dividend paying stocks and mutual funds

- Peer to Peer (P2P) lending (ie LendingClub Prosper etc)

- SWR withdrawals from total return investments

-gauss
I would suggest if you have a lot of $$ in retirement accounts that will be forced to take RMD's and not a lot of other income, that one consider taking out some from the retirement account prior to SS time.
This will lower the RMD amount and possibly mean paying less tax on SS.
One can of course calculate out all the numbers to see if it works for them before doing it.
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Old 11-02-2014, 01:40 PM   #34
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I would suggest if you have a lot of $$ in retirement accounts that will be forced to take RMD's and not a lot of other income, that one consider taking out some from the retirement account prior to SS time.
This will lower the RMD amount and possibly mean paying less tax on SS.
One can of course calculate out all the numbers to see if it works for them before doing it.
The Fidelity RIP has year by year cash flow detail in a spreadsheet with a column for income taxes year by year, so you can change all sorts of parameters, like taking SS later and drawing down the retirement accounts earlier, and compare the results among different SS and retirement account withdrawal strategies.
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Old 11-02-2014, 01:44 PM   #35
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As others have said, you need to get a good handle on all your numbers - SS, expenses, medical costs, etc. and run them through RIP and other calculators.

Most people here are saving for retirement. We realized a few years ago we had a decent income to retire on already if we could just cut our expenses, so we've been focusing on that more. Our energy bills this month a few years ago used to be $300+ and our last bill was under $70. We've been doing the same with cable, the land line phone, insurance, taxes - everything really, and it adds up to needing less than half as much overall as we thought we'd need to retire. Most of the cuts are things we don't miss - like extra cable channels no one watched, bank fees, energy hog light bulbs and appliances, the land line phone, cell phone contracts, higher income taxes, cars with poor MPG and repair records, etc. If you have always optimized your expenses you may not have a lot to cut, but in hindsight we sure weren't on top of our expenses enough.

Plus we still work part-time from home, so that helps. But we cut our expenses enough to be FI without the extra income. What we initially thought were small pensions actually cover a decent part of our retirement expenses these days, now that our expenses are lower.
: love your post and thoughts...did you cut after semi-retirement, or along the way? How is the part time job deal,working for you? --Nomad
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Old 11-02-2014, 02:38 PM   #36
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Originally Posted by daylatedollarshort View Post
If you have not read it yet there is a good book called Your Money or Your Life. It doesn't have any good, specific investment advice, but the concept is to keep reducing recurring expenses and increasing passive income until you reach the crossover point. At my husband's and my ages, with a financial plan for covering 50 more years, every $1K a year we shave off our annual expenses means needing $50K less in total retirement funding, so with our expenses that was easier to do than working full time longer.
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Great advice... much appreciated!! I just ordered "Money or Your Life" on Amazon. I'm buying a lot of the books on the recommended list on this forum site as well at Amazon - used book prices. You see, I'm learning to cut expenses....lol! - thanks again and well received advice... love this forum site!
Great, great book. But read the first 8 chapters and stop. His advice on where to invest (long term US treasury bonds and the like) to generate income was questionable when he wrote it, and practically unworkable for the foreseeable future unless you're prepared to amass a nest egg about 3 times the size he wrote about.
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Old 11-02-2014, 03:06 PM   #37
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Just as an fyi, the content of the book - "Your Money or Your Life" by Joe Dominguez and Vicki Robin appears to have been converted into a "nine step program" and can be found at the following link. http://www.financialintegrity.org

The website at this location appears to contain all of the information in the original book, and, in addition, a collection of "downloadable guides", worksheets, tools and utilities.
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Old 11-02-2014, 04:07 PM   #38
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If you really wanted to cut expenses, you could borrow the books for free from your local library, and if they don't have the book they can do an inter-library loan of the book from another library.
After all your taxes are paying for the library, so make use of it
Hahaha... what happens if a drive all the way to the library (burning fuel and putting wear and tear on my car) and find out the great books that you guys recommend are not there? I already bought 7 books recommended thought this forum site and all were used books with the exception of one that was new ($1.00 more when considering shipping), Lot of these great used books sell through Amazon between $0.01 to $6.00 with shipping costs of $3.99...just click the used link on the book you want to purchase.
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Old 11-02-2014, 04:15 PM   #39
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Passive Income Ideas:
- Vanugard Managed Payout Funds

- Single Premium Immediate Annuities (SPIA's) - after interest rates rise some

- Rental Real Estate (with or w/o outsourced Property Management)

- Pensions

- Social Security

- RMDs from retirement accounts after age 70 1/2

- Dividend paying stocks and mutual funds

- Peer to Peer (P2P) lending (ie LendingClub Prosper etc)

- SWR withdrawals from total return investments

-gauss
Thanks... I know I hit the jackpot finding this forum site a few days ago!
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Old 11-02-2014, 04:19 PM   #40
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Just as an fyi, the content of the book - "Your Money or Your Life" by Joe Dominguez and Vicki Robin appears to have been converted into a "nine step program" and can be found at the following link. http://www.financialintegrity.org

The website at this location appears to contain all of the information in the original book, and, in addition, a collection of "downloadable guides", worksheets, tools and utilities.
I just bought it new at Amazon for $9.00 which includes shipping but thanks for the link. My wife has a Kindle, but I prefer actual books because I work on the computer all day long. I try to read these financial and/or retirement books in bed just before I go to sleep. Lol... they seems to help me fall asleep.
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