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help with my scenario
Old 04-16-2007, 09:40 AM   #1
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help with my scenario

I wonder if I could get help on ideas for testing several scenarios.

Here's my info:

Through paying for college for a couple of kids, weddings, life, etc... I find that my after tax savings are way low while my before tax is pretty good. I have about 1.25M in balanced IRA with about 10k in after tax. I am 53 and would like to plan toward RE (or at least part time work at some point). One obstacle I have in this process is the cash flow needed monthly. Mortgage of 1950 / month with 12 years left on a 15 year 4.75% loan. Home is worth about $350k with 180k balance on loan. My current expenses are about 60k/ year - If I could pay off the mortgage my expense would drop about 24k/year. I would like to explore what my real options are:

Some thoughts -
use 72t to withdraw enough to pay an extra house payment each month?

use 72t to pay house payment and work less (semi retire)?

Downsize in home and move to a less expensive area?

Continue to work and grow IRA until it can fully support expenses?

Any other thoughts about how I might proceed or ways to use firecalc to weigh the cost of tapping into these funds early?
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Re: help with my scenario
Old 04-16-2007, 02:25 PM   #2
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Re: help with my scenario

If you can downsize home and be happy, that appears to be path of least resistance with highest probability of success.

A $1950 mortgage payment is significant, so paying that down is a good place to think about. Consider contributing less to 401k and paying down house with boosted paycheck.
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Re: help with my scenario
Old 04-16-2007, 02:39 PM   #3
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Re: help with my scenario

I agree that downsizing appears to be the simplest solution, assuming you do not want to keep working. Alternatively, you could consider refinancing to a 30 year mortgage, posibly to an interest only loan to cut the payments.

The thing you would have to model is the taxes incurred by pulling t he extra money from tax-deferred accounts. I think turbotax would be more useful than firecalc for that.
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Re: help with my scenario
Old 04-16-2007, 02:40 PM   #4
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Re: help with my scenario

maybe i just don't know how to have fun ... but using your IRA to pay down your mortgage just does not seem like a good idea.
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Re: help with my scenario
Old 04-16-2007, 02:45 PM   #5
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Re: help with my scenario

Thanks for the advice - With a job change over the past few years my AGI slipped a bit and what was an easy payment is putting a cramp on RE plans. I was also looking at the current tax brackets. This year I barely slipped in the 15% bracket and If I boost my income too much with a 72t then I'm sitting at 25%.

A move could really jump start my situation. With a little growth on the IRA plus little or no mortgage - I should not be that far off.
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Re: help with my scenario
Old 04-16-2007, 02:54 PM   #6
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Re: help with my scenario

Quote:
Originally Posted by smileydog
A move could really jump start my situation. With a little growth on the IRA plus little or no mortgage - I should not be that far off.
Plus if you downsize to a less costly location, your otehr expenses should be reduced as well. Being able to chop the expense load makes a huge difference in portfolio sustainability.
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Re: help with my scenario
Old 04-16-2007, 04:01 PM   #7
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Re: help with my scenario

With a loan at 4.75%, you could make a point on the spread, more if your savvy, plus the tax benefits. But we all know this run-around.
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Re: help with my scenario
Old 04-16-2007, 05:39 PM   #8
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Re: help with my scenario

What part of the country are you in? Can you buy anything there for $150-$175,000. In some parts of the country you can buy a decent house for that, and in some you can't even buy a 2/2 condo.

But, if you retire, you could move to one of those areas. I am all for downsizing and keeping expences low during retirement (except fo course for you mega-bucks guys out there)

I think it will help you sleep better at night. Most of us once the kids are gone, don't need such a big place. The bigger the house, the bigger the upkeep, utilities, mortgage, taxes etc etc. There is a time in life I think that
"thinking small" is better than "thinking big".
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Re: help with my scenario
Old 04-16-2007, 07:52 PM   #9
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Re: help with my scenario

I'd sell you my house for $175k... :P
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Re: help with my scenario
Old 04-16-2007, 08:31 PM   #10
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Re: help with my scenario

I'm in Atlanta metro but have always planned on moving out possibly to an age restricted community in a smaller town. I do plan on staying in the Southeast for now.
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