Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Reality Check
Old 03-07-2006, 02:02 PM   #1
Dryer sheet wannabe
 
Join Date: Mar 2006
Posts: 21
Reality Check

Hi,
I've already posted this over on the other forum, so forgive me if you've seen it before!

I guess I'm not exactly an early retirement candidate, since I'm 62 and still working, but I'd like to run my numbers by some members and see if my logic makes sense. I'm an obsessive number cruncher and have a cash flow plan going out 40+ years! The calculators say I'm ok, but I'm nervous!
I'm 62 and my wife is 48. I assume we'll both live to 92.
I'm still working making $90K, maxing out a 401k and IRAs before and after tax.
Target retirement is age 64. Soc. Sec. should be $20K/year.
We own a rental house, market value $650,000, no mortgage, $2100/mo. rent. I usually raise the rent by inflation annually.
Personal residence has a $125K balance, 12 years to pay off. Market value $500k.
Target expenditure level after retirement $65k/yr, which includes a generous amount of travel and leisure expenses.
Investments in retirement accounts: $450k. 60% index funds, 40% bonds.
Investements in taxable accounts: $225k, same split. with muni bonds.

Using a rate of return of 5%, 3% inflation, everything seems to continue to grow with the $65k expense level. I've factored in replacing cars every 10 years.

Any comments? I'd appreciate feedback.
Thanks,
Rick
__________________

__________________
foxhuntr is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Reality Check
Old 03-07-2006, 03:12 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Mar 2006
Location: Houston
Posts: 2,155
Re: Reality Check

Hi Rick,

I'm NOT an expert, but your rental property surprises me a little.* The yearly rental income is only 3.88% of the property market value.* That's kind of low, isn't it.

Sam

Quote:
Originally Posted by foxhuntr

We own a rental house, market value $650,000, no mortgage, $2100/mo. rent.* I usually raise the rent by inflation annually.

Any comments?* I'd appreciate feedback.
Thanks,
Rick
__________________

__________________
Sam is offline   Reply With Quote
Re: Reality Check
Old 03-07-2006, 03:37 PM   #3
Dryer sheet wannabe
 
Join Date: Mar 2006
Posts: 21
Re: Reality Check

That's southern CA for you. Rising property values have brought in speculators and it's not a great rental market. I've had the same tenants for 11 years and haven't been aggressive about wringing every available rental dollar out of them. I feel that long term tenants are valuable. Also, if I converted the property to liquid $$$ I'd have capital gains taxes and would lose the appreciation.

Thanks,
Rick
__________________
foxhuntr is offline   Reply With Quote
Re: Reality Check
Old 03-07-2006, 04:52 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Mar 2006
Location: Houston
Posts: 2,155
Re: Reality Check

Quote:
Originally Posted by foxhuntr
That's southern CA for you.* Rising property values have brought in speculators and it's not a great rental market.* I've had the same tenants for 11 years and haven't been aggressive about wringing every available rental dollar out of them.* I feel that long term tenants are valuable.* Also, if I converted the property to liquid $$$ I'd have capital gains taxes and would lose the appreciation.
Southern CA! That's what I thought. But, assuming a low property tax rate of 1%, then the real rental income is less than 3% of the property value. Ouch!

And will the appreciation continue forever? Just wondering out loud here.

Anyway, back to your original question. I'm a number cruncher too, and I think you're in excellent shape. Question is, why are you still working?

Sam
__________________
Sam is offline   Reply With Quote
Re: Reality Check
Old 03-07-2006, 05:12 PM   #5
 
Posts: n/a
Re: Reality Check

Yes, you can do it. What I'd do: retire tomorrow while still young and healthy, sell rental property, sell house, move to a less-crowded and less-expensive small town.

Working for two years more is risky -- you might die before you can retire.
__________________
  Reply With Quote
Re: Reality Check
Old 03-07-2006, 05:23 PM   #6
 
Posts: n/a
Re: Reality Check

That's what I noticed! - 650K rental property. Sell it buy a CD paying 5% - NO property taxes, no Worries!



Also your statement

Quote:
Using a rate of return of 5%, 3% inflation, everything seems to continue to grow with the $65k expense level. I've factored in replacing cars every 10 years.

Everything is growing except your life! - Why do you want your portfoilo to grow? - You'll be 80 in 18 years, and it will be pretty much over by then, even if you are still alive!
__________________
  Reply With Quote
Re: Reality Check
Old 03-07-2006, 05:52 PM   #7
Recycles dryer sheets
Robert the Red's Avatar
 
Join Date: Aug 2005
Posts: 325
Re: Reality Check

Even better - sell current home, bank profit tax-free.* Move into rental home for 2 years, retire on schedule, sell home and bank its profit tax-free (except for depreciation recapture).* Move to Chiang Mai and live like royalty.
__________________
Robert the Red is offline   Reply With Quote
Re: Reality Check
Old 03-07-2006, 06:13 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,094
Re: Reality Check

Quote:
Originally Posted by Cut-Throat
That's what I noticed! - 650K rental property. Sell it buy a CD paying 5% - NO property taxes, no Worries!

Also your statement
Everything is growing except your life! - Why do you want your portfoilo to grow? - You'll be 80 in 18 years, and it will be pretty much over by then, even if you are still alive!
I agree with Cut-Throat.
You are 62! What are you waiting for - a telegram from God? Do bother waiting - Western Union stopped that service recently.
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Re: Reality Check
Old 03-08-2006, 04:17 AM   #9
Full time employment: Posting here.
 
Join Date: Apr 2005
Location: Duesseldorf, Germany
Posts: 942
Re: Reality Check

I have known lots of people who believed that "there is not yet enough to retire".
They did not live till the day when there is enough.
But their kids and other relatives enjoyed the savings - sometimes even could retire on them...
"Get a Life: You Don't Need a Million to Retire Well " by Ralph E. Warner (Nolo Press) provides an excellent reality check as well as lots of input for retirement planning.
__________________
chris2008 is offline   Reply With Quote
Re: Reality Check
Old 03-08-2006, 07:34 AM   #10
Thinks s/he gets paid by the post
SteveR's Avatar
 
Join Date: Jul 2005
Posts: 2,803
Re: Reality Check

What about health insurance? If you have coverage after retirement or can be covered under your wife's employer then I would have a really hard time trying to justify staying on for another 2 years. Run some calcuations to see what you really gain, after tax and working expenses, by doing so vs working for 2 more years. Only you can decide what works for you and your comfort level but avoid calculation constipation.

There are a number of members here that have the assets to retire today but choose to continue to work for a variety of reasons. Being Financial Independent (FI) is the main goal; retirement is the benefit of being FI. Some would rather pad the nest egg to assure they will have enough for their lifestyle at 100% level until they are 100+ using a pretty high spending level. Others like their work but still think about ER. Some want to ER and are working towards it with a firm plan and a firm number of $$ it will take. Do what works for you. Read the comments here, take away those that work for you and leave the rest.

Early retirement is relative to your situation. It is not a race, it is a goal. The level of toxicty in your job will be a major factor in when you finally leave. We tend to find ways to live on less when presented with an option to leave a negative work environment.

Good luck in your decision and welcome to the board.
__________________
Work? I don't have time to work....I'm retired.
SteveR is offline   Reply With Quote
Re: Reality Check
Old 03-08-2006, 09:02 AM   #11
Thinks s/he gets paid by the post
wildcat's Avatar
 
Join Date: Feb 2005
Location: Lou-evil
Posts: 2,024
Re: Reality Check

Quote:
Everything is growing except your life! - Why do you want your portfoilo to grow? - You'll be 80 in 18 years, and it will be pretty much over by then, even if you are still alive!
Damn C-T is good, he definitely puts the "reality check" into the thread.
__________________
"These walls are kind of funny. First you hate 'em, then you get used to 'em. Enough time passes, gets so you depend on them"
wildcat is offline   Reply With Quote
Re: Reality Check
Old 03-08-2006, 10:33 AM   #12
Dryer sheet wannabe
 
Join Date: Mar 2006
Posts: 21
Re: Reality Check

Thanks for all the great inputs! Based on all of that I've decided to move my date up. I'm going to retire in 10 months, 18 months til my 65th birthday, so I can get medical insurance through COBRA. My wife doesn't work, so I'll shop for an individual policy for her. Any suggestions?

I work at a very nice place with a nice group of people and no stress whatsoever compared to my 35 years in high tech middle management. My main desire to retire is to have more free time to goof off and do the things I enjoy every day instead of just on the weekends.

As to the rental property, we have considered the option of moving in to get the capital gains exemption, and we may do that in the future. We like living in CA, so no escaping to Chaing Mai! We lived in the Rangsit area of Bankok for a year and it's not for me long term.

We're heading to Italy for the month of April - that will be my longest vacation ever- should be fun.
Thanks again.
Rick
__________________
foxhuntr is offline   Reply With Quote
Re: Reality Check
Old 03-08-2006, 09:28 PM   #13
Thinks s/he gets paid by the post
lazygood4nothinbum's Avatar
 
Join Date: Feb 2006
Posts: 3,895
Re: Reality Check

Quote:
Originally Posted by foxhuntr
I can get medical insurance through COBRA.* My wife doesn't work, so I'll shop for an individual policy for her.
check me on this but if i understand cobra correctly (i'm on it now) it can pick up precisely the same insurance you have through your employer. so if wife is currently covered by that, then she should also be covered for at least the 18 months of cobra.

caution on cobra: while they had no problem accepting my premiums, they neglected to tell the insurance companies i was still covered. so each first time (with medical, dental & vision) i had to make sure the insurance company knew i was covered or the doc's office would be told i was uninsured.
__________________
"off with their heads"~~dr. joseph-ignace guillotin

"life should begin with age and its privileges and accumulations, and end with youth and its capacity to splendidly enjoy such advantages."~~mark twain - letter to edward kimmitt 1901
lazygood4nothinbum is offline   Reply With Quote
Re: Reality Check
Old 03-09-2006, 06:42 AM   #14
Full time employment: Posting here.
 
Join Date: Apr 2005
Location: Duesseldorf, Germany
Posts: 942
Re: Reality Check

Enjoy Italy!
__________________
chris2008 is offline   Reply With Quote
Re: Reality Check
Old 03-09-2006, 08:08 AM   #15
Thinks s/he gets paid by the post
tryan's Avatar
 
Join Date: Mar 2005
Posts: 2,447
Re: Reality Check

COBRA will cover your wife as long as she's currently covered. But in 18 months she'll need an individual policy. Better to apply younger than later.

Also learned BC/BS was better/cheaper than COBRA ; and had to be in my wife's name (she's also younger).

Good Luck.
__________________
FIRE'd since 2005
tryan is offline   Reply With Quote
Re: Reality Check
Old 03-09-2006, 10:25 AM   #16
Dryer sheet wannabe
 
Join Date: Mar 2006
Posts: 21
Re: Reality Check

Yes, I'm aware that she can be covered by COBRA, but I also felt we could beat the COBRA rates for her. She's healthy, no Rx drugs, etc.

Speaking of procrastination, I mentally moved my date up 6 months, but now am having second thoughts. I'll be eligible for a 15% bonus if I stay through May instead of January. Also some extra 401K company contribution. I guess you just have to decide to bite the bullet and do it, because there will always be something in the future tempting you to keep working longer.

__________________

__________________
foxhuntr is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
I was written a bad check, and need some help thefed Other topics 50 04-16-2007 07:49 PM
How to verify a cashier's check is legit REWahoo FIRE and Money 68 03-28-2007 08:49 PM
Is it income if you can't cash the check? lifeisgood FIRE and Money 16 01-01-2007 02:50 PM
Living Check To Check: Saving Too... MYPROcheckGRESS Young Dreamers 38 02-16-2006 03:36 PM
Health Insurance Info - Check the MIB for $9.00 Telly Other topics 5 09-06-2003 03:37 AM

 

 
All times are GMT -6. The time now is 09:39 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.