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Old 08-02-2019, 02:25 PM   #1
Confused about dryer sheets
 
Join Date: Jul 2019
Location: Washington
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New member; 52 and ready to go (almost)...

Hi all,

New member here looking for a bit of feedback. As the title says, I am planning to RE from my Federal position in 2021. At that point I'll be 54, and my spouse will be 65.

Right now we have about $4M in net worth, with about $1.6M in brokerage or retirement accounts (cash, bonds, stocks, 401K, IRA, TSP). The rest is real estate, including property that generates ~$60K per year in rental income.

Our plan is two parts...

The first part is 2021-2030. This period is before I can collect my Federal Pension or Social Security. Our income during that phase will be:
60K rental income
20K spouse's social security
40K brokerage withdrawls
That's $120K total, which would support our current spending ($90K) + $30K for taxes. I'm guessing our spending level will be about the same - we'll get rid of the current mortgage ($1500/mo) and move to a lower COL area, but I'll end up spending up to $1500/mo on ACA premiums and other health care (spouse will move to Medicare).

The second part is 2030- the grave. Here I can collect pension & SS:
60K rental income
20K spouse's social security
30K pension
25K social security
So we'd be okay without withdrawing anything further from the brokerage account. The remaining brokerage and TSP funds just be left for long-term care, or end of life medical issues.

Most of the income streams (SS, pension, rent) are indexed for inflation.

I've done the FireCalc simulations and it has 100% success rate. I guess the biggest risks are:
* rental income property burns down or earthquake (it's in CA)
* health care costs spiral out of control
* Federal pension abolished or significantly curtailed.

Seems like this should work... do you guys see anything I've missed?
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Old 08-02-2019, 02:35 PM   #2
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Do you want to own rental property for the rest of your life? Are you confident that it can generate the $60k income indefinitely?
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Old 08-02-2019, 02:38 PM   #3
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$30k for taxes in phase 1 is probably way too much since some of your $40k brokerage would be principal or basis and some would be gain, 15% or more if SS would be tax-free and capital gains would likely be tax-free at that income level.

If half of your brokerage withdrawals are capital gains, then your taxable income would be $60k rental income, at most $17k taxable SS + $20k LTCG less $24k standard deduction = $73k. That means that the $20k of LTCG would be tax-free and the $53k of ordinary income would be about $6k for federal income tax ($19k at 10% and the rest at 12%)... plus any applicable state income tax... but well south of $30k.

You can plug some numbers into TurboTax's What-If Worksheet or Taxcaster to refine it.

Either way, you're golden.
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Old 08-02-2019, 02:48 PM   #4
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You may have to wait until 2021 to reach certain seniority, but from your numbers, I'd say you are good to go TODAY!
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Old 08-03-2019, 06:16 AM   #5
Confused about dryer sheets
 
Join Date: Jul 2019
Location: Washington
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Quote:
Originally Posted by joeea View Post
Do you want to own rental property for the rest of your life? Are you confident that it can generate the $60k income indefinitely?
I think this is okay. The properties are managed by a local company, and the 60K rental income is net, after management fees. So the effort involved is minimal. They are in a desirable area of Southern California near the ocean, and if something critical were to change (e.g. tax situation) I'm confident we could sell the properties and add the proceeds to our brokerage account.
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Old 08-03-2019, 06:17 AM   #6
Confused about dryer sheets
 
Join Date: Jul 2019
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Originally Posted by euro View Post
You may have to wait until 2021 to reach certain seniority, but from your numbers, I'd say you are good to go TODAY!
Music to my ears! Thanks.
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Old 08-03-2019, 06:38 AM   #7
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Need more info on rental. ‘$60k’ - is that revenue, net income, include repairs, etc.

I agree with most on here that you will one day want to sell your rental but either way it sounds like you will be fine on money.

How much is (will) your primary be? If you need $90-100k so you’re planning on $120k withdraws I would say you will be fine if you have over $2.5 million invested since you have a nice pensions/as support.
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