Is it doable?

[nun]

Here's my situation, I'm fed up working and want to ER...probably a common feeling on here, but can I do it? I have $200k in after tax and $400k in tax deferred retirement accounts. I have $150k left on a mortgage on a 2 family valued at $550k and I get $2000/month from it in rent. The monthly mortgage is $2500, $600/month on RE taxes and insurance, $400/month medical ins and $1500 other expenses. I'm 49 and will get a $5k annual pension at 59.5, $12k/year SS at 62 and $12k/year other pension at 65. I think I'm close, but maybe I don't have enough of a cushion yet for potential down years.

 

[MasterBlaster]

In the Ballpark

The way I see it you have $5k/month in expenses. Taking your total savings at a 4% safe withdrawal rate gives you $2k/month. The rental gives $2k/month

so you are short around $1k/month. The $12k/year SS at 62 years old would get you there. The $5k and $12k pensions would give you some cushion.

When you compute rental income, you need to account for periods when the unit(s) aren't rented. You also need to account for the inevitable expensive repairs that will come.

 

[nun]

Thanks, I could always reduce my mortgage payment to $1200/month by refinancing to a new 15 year mortgage at 4%. In the 10 years I've owned my 2 family it's never gone unrented, it's in Boston so the rental market is strong and I just had a new roof, exterior painting and new heating put in as I wnated to get those out of the way while I was working.

 

[Kronk]

Or you could pay off the $150k mortgage with the $200k after tax funds. You'd be left with $450k in investments worth $1500/month @4%. Add another $2k/month in rental and you are at $3.5k/month income to offset $2.5k of expenses. In that scenario, you'd be doing a 72t to get at your retirement funds so you'd have taxes to take care of that would add to your expenses.

Still, it looks doable to me, providing you are comfortable with the rental. By age 65, you look to have a large percentage of your expenses covered through pension/social security, so the risk might not be that high. Are the pensions fixed or COLA?

 

[nun]

Or you could pay off the $150k mortgage with the $200k after tax funds. You'd be left with $450k in investments worth $1500/month @4%. Add another $2k/month in rental and you are at $3.5k/month income to offset $2.5k of expenses. In that scenario, you'd be doing a 72t to get at your retirement funds so you'd have taxes to take care of that would add to your expenses.

Still, it looks doable to me, providing you are comfortable with the rental. By age 65, you look to have a large percentage of your expenses covered through pension/social security, so the risk might not be that high. Are the pensions fixed or COLA?

Both are COLA, one is from an old employer the other is UK SS. If I refinance to a 15 year mortgage I can cut my monthly expenses to $3.5k, but an argument for paying it off is that if I can reduce my income to under $32k/year I can get health insurance for $150 a month through the state.