is this a good plan?

[ed_teach]

can some of the experts let me know if this is a workable plan?

I have 689k most in cash cds drawing 5% appx 50k is in iras mut funds, I have a baloon payoff on a land contract that will bring me in an aditional 85k in 30 days. makes me an total cash of appx 700k that is drawing intrest the rest is in iras or stocks, I contribute 6k each year to ira mut funds. I have other propertys that conservitivly bring could be sold for cash of 110k so I would have a total of appx 820k plus my iras and stocks. my plan is to draw intrest on the 820 and live off of it should bring in 37k each year give or take. so if I have 40 years to live and I will need cost of living increas over that time. I have planed on ss kicking in and helping 20 years, and also the iras in 10 to 15 years should have grown nicly to off set the cost of living increase, and in later life cant you start to draw on the principal? at maybe 65 or 68 start to use a principal draw? my main question is we pay all of our bills with my wifes income and I have been semi out of the work force for 3 years, her income before taxes is 35k the only bennie is health ins. but she pays for mine. and we get along very well on that, no kids and probely wont have any. my delema is I do not want to jump ship if working part time and her job would set us up substancialy better by working a few years more.

[charlie]

Ed, both my wife and I are retired and are living
comfortably on about $21,000 SS income plus
about 4.1% draw on a total portfolio of $610K.

At first blush, you seem to have the financal
strength to retire as well, especially if your wife
wants to continue to work.

In my opion, it is important to become knowledgeable
about how to manage a portfolio before you make
any major decisions. A good place to start would be
to read Bernstein's "4 Pillars of Investing". This is
an excellent and very readable book. Unless you
build a solid foundation for yourself, how will you know
when you are getting good advice?

There are many smart people on this forum who will
offer good opinions but they will be all over the map.
You have to figure out what is best for yourself.
Nobody else can do this better than yourself if you
are willing to invest the time and effort.

Good luck,

Charlie

[unclemick]

Ed. From reading your posts, it looks like you're more at home with CD(fixed income) and real estate than stocks - also collectables?

?How emotionally comfortable are you with the volility of the stock market? I'm a balanced index(Boglehead) type of guy and so I would tend toward stock/bond issues.

Your portfolio size would allow cash and CD income while you looked around (RV or rent in different places). Then you could decide on fixed income, ral estate, stock mixes that worked for you.

You may feel your strength is in real estate. Mine isn't.

[Jarhead*]

Ed Teach:

As Charley wrote, it appears you could retire if you were very motivated to do so. (You would have more than a large percentige of people that retire early).
However, in you sign off sentence, you asked if you might be better off continuing for a few years as you are. Absolutely, and I also get the feeling from your post that you aren"t in any big hurry to totally retire.

If that is the case, you're in the cat birds seat now. You can spend some time perhaps exploring different tactics to diversify your holdings.
I assume your house is paid for, which helps, and if you can get a handle on health ins. would be a big advantage. (I would suggest you get an outside plan before you have any pre=existing conditions that would make it very expensive, or impossible to get). It seems to be one of the major glitches of early retirement nowadays.
All in all, I believe a lot of people would be happy to be in the position that you are in.
Regards, Jarhead

[charlie]

Ed, you are probably aware of this, but in 10 years
your stash will need to grow about 34% just to keep
up with inflation at 3% per year. Investing only in
CDs or bonds won't cut it if you spend all your
income. Like unclemick, I am a Boglehead and believe
in balanced index investing. Check out Vanguard's
Target Retirement Income fund or Life Strategy Income
fund if you are uncomfortable with stocks in general.
These funds maintain a fixed ratio of stocks to bonds
that is just about right to keep up with inflation if you
spend the income.

Regards again,

Charlie

[ed_teach]

thanks, I think the best thing is to see if my wife can get a leave of absence next winter so we can leave the great white north, and travel the south to find a place we feel comfortabel with, and then look for places to work at least part time to off set the cost of living and also look at investing more into stocks. I wll look athe the two funds that you mentioned. thanks again.

[unclemick]

Ed. 70-80% of our retirement fund is Vanguard Lifestrategy moderate and conservative. Target retirement series are the new kids on the block - I have the Vanguard package but will probably keep the horse we rode in on. Either are good - IMHO.

[JWR1945]

ed_teach

Quote:

my dilemma is I do not want to jump ship if working part time and her job would set us up substantially better by working a few years more.

IMHO, you would be better to handle this slowly. At least wait until you are comfortable with your decisions. You can always accelerate matters later on.

I am very much surprised that you have not made real estate rentals the centerpiece of your retirement income strategy. Those who are willing and have experience can usually do much better than stock market investors. [If you have even the whiff of rent control, stay away from real estate. If local prices are obscene, as happens from time to time, wait for a better time.]

Stocks can be good diversifiers. Only a very small number of stocks make sense at today's valuations. IMHO, it is better to wait.

Today's TIPS (on the secondary market, originally sold with 30 years to maturity) at 2.2% and/or your 5-year CDs at 5% can give you time for stock valuations to improve. Understand that you would be in a holding action, not active investment, for up to a decade.

Now is the time when it is imperative to hurry up and do nothing. Opportunities will come soon enough.

Have fun.

John R.

[Brat]

Ed, if you plan to move upon retirement then owning rental property that you need to care for at a distance is not a good idea. If you like realestate as a foundation for your retirement income research realestate investment trusts. A good place to start is Forbes back issues.

As others have mentioned, CD's won't keep up with inflation. Collectables need to be cared for, even high-end art has a market cycle.. they are not "investments" for retirement.

The Vanguard fund mentioned is excellant, you may also want to look at Dodge & Cox Balanced and Oakmark Equity Income. Both have good solid records in up and down markets.

Read a couple of books about lifetime income planning. A recent book is "How not to go broke at 102". This will get you thinking about retirement issues.

One approach that has been suggested to me is to set aside your first 5 years income in something very secure (CD's, annuity), the next 5 years in bonds (a ladder of Federal and/or several different corporate issues that mature in each of the 5 years, or mortgage mutual fund), the remainder in diversified mutual funds. For the latter the two balanced funds I mentioned are good candidates, add some international fund such as Matthews or Oakmark's.

If you and your spouse are considering a move RENT for at least a year before buying. What looks good from a brief stay may not be great for the long term. This is where you will learn if there is enough to keep the both of you busy in your new community, and whether or not you miss your friends/family in your home town.

Early retirees don't gravitate to retirement communities, however, if you are considering places like FL or AZ consider the following: A friend of mine commented that there are retirement communities that are great for couples, but tough for widdows/ers. If you buy in a "retirement community" look at the demographics carefully.

[ed_teach]

Thanks.
My wife and myself are buying a travel trailor. It is a 25 foot 04 keystone with walk around queen bed. It is meat and potatos but has all the nicities of home.
i.e. micro, cable hook, walk in bath. double door fridge. ect. and the price is right out the door with all hook ups to my truck i.e. ele. brakes, weight transfer bars.tax, title. plates, and the plates in mi are lifetime never need them again. 11500, My plane is to have my wife tell her employer that my family needs help for a medical problem, this is a partial truth.. and that we need to go to help out for 3 months next winter. the reason for this is to eliminate the jelousy factor, people will give you a break if you are sacraficing for others but if you are doing something for yourself forget it. if this works we can try our different spots with out burning a bridge and she can pick up another years income while we come back to sell our home , if we find our perfect spot. if not then we can pick up where we left off.
There are a couple of things that I would love to do, one is there is a nice b&b victorian in a nice town in fla. that brings in 110,000 gros. a year with owners quarters. for 495k out of all my money I have considered 200k aside that was never figured in for another home. this would take the price down to 300k needed to invest. It is a turn key opperation, with all antiques to be left. I figure even if it cost 60k to opperate it that leaves 50k income. that is one idea. the other is to buy rentals as I had as many as 4 at one time and I was raised in the building trades, and know a lot although not everything, and have made more money off of rentals than anything elses that I have invested into. I could try to do a 1031 exchange on the vacant land that I am trying to sell although that is very difficult with the laws the way they are. I have to have everything in line before I sell I.E. the account and at least some idea of what and where I am going to reinvest as I have if I remember right 180 days to reinvest it. and as it is only a tax deferal I will want to be where I will want to be for a while. and in reality I do not want to do nothing in retirement. but want to be free to do what I want. trips and travel ect. the b&b is only appx. 10 miles from the orlando area and you are always bussey for bike week in datona and the theme parks will always bring in some people. I have always wanted to try a b&b in an old victorian setting. It probely wont happen but you never know. and this is not the only one for sale.

[Brat]

Gosh, a B&B? Think long and hard about that. Turnover of ownership of these establishments tells me that reality has not met exepectations. Another option would be condo(s) in a resort development with a high occupancy rate. We did that years ago, and came out very well.

Realestate swaps only postpone tax. Don't be seduced by that into a deal that consumes your life. None of us has a crystal ball, but IMHO the tax rate will go up in the future, not down. Chew that over with your tax advisor.

B and B businesses are only one notch up from
restaurants on my list of investments to avoid.
Can't imagine anything worse, but that's just me.

Just bought a nice condo in a beautiful resort area.
Love it! Time will tell how it works out as an investment.

John Galt

[cute fuzzy bunny]

I know a couple that operates a b&b. They hate it but they cant get out. At least one of you has to be chained to the place 24x7. You have to be cook, maid, concierge and problem solver for everyone who stays there.

What probably saved their lives was my suggestion to pitch themselves to corporate clients who wanted an alternative to hotels when they travel. For any business destinations that I travelled to more than once or twice a year I always dug up a nice little b&b close to the office and stayed there. They sent their information to the corporate travel offices of several of the local large businesses and their clientele changed from mostly demanding couples to almost exclusively low maintenance business people travelling. It also decreased their vacancy rate to nearly zero.

[Brat]

<<Another option would be condo(s) in a resort development with a high occupancy rate. >>

What I had in mind was an investment similar to a B&B without the hassle. Most resort communities have management firms that book, clean, and collect $. If he can put together a swap where he aquires several units they can eventually be sold off piece-meal.

He will need to check them out from time to time to make sure the property management firm is doing a good job.

[ed_teach]

in reality I think I would be better off just buying a home in the area I would like to live and have myself and the wife look for work in the areas we know, my wife is a title office manager and I have been in the floorcovering installation business for years. and I have done well in month to month rentals. I could always pick up a duplex or some other rental investmant. my main problem is I would be fine working part time doing my instalations and having my wife keep on with the title work, I just hate it in the winter so bad it makes me start to do crazy things by the end of feb. like planing to sell everything off cheep, even though I know that is not a good idea. I love it here in the summer and fall. but winter when it is 40 below 0 and the wind is howling and the snow is dumping a foot each night I feel traped. and it is not worth fighting the feeling, I am not sure what the problem is but I am sure it is me. but I still have to deal with it, and the best thing I can come up with is to find a town in the south that I like. I have no family that I am close to here. as I was raised a jehovahs witness, and I left the cult several years ago, now none of my family will talk to me as you can not leave the cult. so to get away from that would be nice, but the weather is the main problem. I can deal with the small mindedness of the cult members that once were my family, but the weather is something that I can not win. I feel like I am tilting windmills. some say you trade the cold for the heat. true but when the heat is peaked in the summer I can go out after sun down and work in the yard car ect. but in the north after sun down it goes from 40 below to 60 below. the car wont start, ice dams on the roof make it leak. the furnace does not stop running, watter spiggets freez. i cant feel my toes, my hair freezes to my head after a shower and I go out, along with my nose freezing shut when I breath in, and when it is really cold you cant take a breath with out choking, any one who lived in the north knows I am not joking, I wish I were, this winter I ran out of places to push snow. I have a half ton dodge with a 8 foot western plow and lost the culdasak around my home. needed it to push snow in to. had 8 foot high banks. when I went to key west it was all I could do to get on the plane and come home. so we all have to deal with our own likes and dislikes, I know of many who love the snow, they snow mobiel and ski, I like to ice fish but dont as it is to cold until march and then the ice thins to fast and not safe to go out fishing.
I know I need to find a place in the sun. louisiana, alabama, florida, georgia.

[unclemick]

Wow! And I used to think Lttleton,CO was cold. I'm inclined to think warmer is better as the clock ticks on - I tend to hibernate below 40 - which doesn't last long in south louisiana.

Hope the real estate posts keep up - having been a less than stellar real estate investor over years - I find them informative. Although I think us stock types are longer winded. ? Or is real estate more difficult to discuss - due being 'location dependant'.

[charlie]

Ed, put North Texas on your list of areas to check out. The small towns north of Dallas like Frisco, Prosper,
Celina, Mckinney and many others are seeing the
highest growth rate in the country. For a man experienced in the building trades and a wife who
is in the title business you would have all the work
you want. We had our winter 2 weekends ago.... a
3" snow that lasted 1 day.

Yawl come, yuh heer?

Charlie

[Martha]

I am sympathetic on the long, cold winter issue. I live in northern Minnesota and this winter has been a bear. Right now it is snowing yet again. However, we plan to stay Minnesota residents on retirement because we can buy insurance here through a risk pool. But we don't have to stay in the winter. We own a fourplex here in Minnesota. We will continue to live there and be Minnesota residents. It is paid for so rent on the other three apartments more than covers expenses and provides a little income. We live there for free. We will need to pay someone to watch the place when we are gone, but economically it still was a great decision to downsize and move into an apartment we own. It is amazing what it does for your income and expenses to own real estate that provides income as well as a place to live. Come winter, we will snow bird in a small motorhome. We will look south to see if there is anyplace we want to buy that is relatively inexpensive and low maintainance. Or, we will just keep using the motorhome until it wears out.

[ed_teach]

that is my idea also, I am sure we will get the trailer, I am also going to put my home on the market and see what kind of responce we get. I will ask a little over market to start. it is six of one and half a dozen of the other, if I get a lower price for my property here, I should be able to find a better deal in this economy, I just have to find that spot and make it mine. I always try to talk myself into "it aint so bad here" but with the taxes high, I think I can find a nice southern town with low taxes and a superwalmart, I still fly the confederate flag, "i am a civil war nut. " I tell every one that I am behind enemy lines, and the civil war the "war of northern agression

[unclemick]

I'm also behind enemy lines - years ago on blackpower days at the range - I drew some strange looks with my big U.S. beltbuckle, 1860 old army and 1863 remington rifle(BTY- that model is a no no for reinactors).