Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
New Member - Plan to retire by 45
Old 05-29-2019, 03:03 PM   #1
Dryer sheet aficionado
 
Join Date: May 2019
Posts: 34
New Member - Plan to retire by 45

Hi All,
I want to see what you guys think on my approach on early retirement. Please guide me on something I am doing wrong or you think i should start doing right away

About me:
I am currently 34. I started the idea of early retirement around 2 yrs back. Tired of corporate culture. I plan to retire by 45.
We have 1 kid for now. Our yearly expense if $60k-$65k (CAD) per year.
Me and wife recently moved from US to Canada.
We dont have a house in Canada. The house in US was sold last year

On Investments and Funds:
1) We have a net saving of $200k (USD) for now.
2) I have few rental properties in US and those are giving me steady returns of around $4000 (USD) per month. I plan to use snowball method to pay off these properties before I turn 41. After that, i can take a net take home of $7500-$8000/month from rental properties. Converting to CAD, it should be close to 10k per month
3) We have started our RRSP this year only. Plan is to max out every year to reduce our overall taxable income till 45.
4) TFSA/RESP opened this year and plan to max out as well till I am working (Plan is till 45)

I always thought rental income will be what we will be using in our retirement. Not planning to touch RRSP or TFSA income for a while (aleast another 10-15 yrs).

I also don't know how to use FIRE calc in my situation? (Since I am getting rental monthly income, should I multiply that by number of years and use the calc?)

What do you guys think on my situation till now? Anything which I have to start looking into right away.

TIA
__________________

retireby45 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!

Bienvenu
Old 05-29-2019, 03:44 PM   #2
Thinks s/he gets paid by the post
Mdlerth's Avatar
 
Join Date: Oct 2016
Location: The Shire
Posts: 1,312
Bienvenu

Quote:
Originally Posted by harpreethwalia View Post


I always thought rental income will be what we will be using in our retirement. Not planning to touch RRSP or TFSA income for a while (aleast another 10-15 yrs).

I also don't know how to use FIRE calc in my situation? (Since I am getting rental monthly income, should I multiply that by number of years and use the calc?)

What do you guys think on my situation till now? Anything which I have to start looking into right away.
Go to the Other Income/Spending tab, and at the bottom enter your rental income as a pension.

And also, welcome to a fine, fun place. Plenty of smarter (and better-looking) folks here will give you additional pointers. Meanwhile, I look forward to your future posts.
__________________

__________________
Paying it forward is the best investment.
Mdlerth is online now   Reply With Quote
Old 05-29-2019, 04:14 PM   #3
Full time employment: Posting here.
 
Join Date: Nov 2013
Posts: 545
First off welcome to the forum!

I like you, plan to use rental properties for income generation and wealth accumulation. I have four properties right now generating a net of $22k/year after setting aside/spending 50% of rent gross and paying off mortgages.
Is your net $4000/month? Are they SFH or Multis? I assume 50% of rental income goes to expenses averaged over the long term, but I have not seen any of those lumpy capital expenses yet and my vacancies have been low.
If your net is $4k going to $8k I would go ahead and pull the plug at your mentioned time line based on rental income. I would however favor accumulating more properties rather than paying them off. I find that the return appears to be the same but with more benefits to having additional properties and deductions leveraging other peoples money.
I would be concerned managing these properties from afar however, it will most likely drive your costs up.
NgineER is offline   Reply With Quote
Old 05-29-2019, 05:26 PM   #4
Thinks s/he gets paid by the post
HNL Bill's Avatar
 
Join Date: Dec 2017
Posts: 1,599
Quote:
Originally Posted by harpreethwalia View Post
I am currently 34. I plan to retire by 45.
We have 1 kid for now. Our yearly expense if $60k-$65k (CAD) per year.
Me and wife recently moved from US to Canada.
We dont have a house in Canada. The house in US was sold last year

On Investments and Funds:
1) We have a net saving of $200k (USD) for now.
2) I have few rental properties in US and those are giving me steady returns of around $4000 (USD) per month. I plan to use snowball method to pay off these properties before I turn 41. After that, i can take a net take home of $7500-$8000/month from rental properties. Converting to CAD, it should be close to 10k per month
3) We have started our RRSP this year only. Plan is to max out every year to reduce our overall taxable income till 45.
4) TFSA/RESP opened this year and plan to max out as well till I am working (Plan is till 45)

I always thought rental income will be what we will be using in our retirement. Not planning to touch RRSP or TFSA income for a while (aleast another 10-15 yrs).

I also don't know how to use FIRE calc in my situation? (Since I am getting rental monthly income, should I multiply that by number of years and use the calc?)

What do you guys think on my situation till now? Anything which I have to start looking into right away.

TIA
Welcome! What are your projections for your retirement accounts (I'm not familiar with RRSPs and TFSAs) at your retirement age? I'd personally be uncomfortable with all of my income coming from real estate, and only relying on that for 15 years, with the associated one-market, lack-of-diversification risk that brings. Does the listed real estate income account for all costs, and taxes?

Will you qualify for SS, or Canadian SS?
__________________
Balance in everything.
HNL Bill is offline   Reply With Quote
Old 05-29-2019, 06:38 PM   #5
Dryer sheet aficionado
 
Join Date: May 2019
Posts: 34
Quote:
Originally Posted by HNL Bill View Post
Welcome! What are your projections for your retirement accounts (I'm not familiar with RRSPs and TFSAs) at your retirement age? I'd personally be uncomfortable with all of my income coming from real estate, and only relying on that for 15 years, with the associated one-market, lack-of-diversification risk that brings. Does the listed real estate income account for all costs, and taxes?

Will you qualify for SS, or Canadian SS?
RRSP is like 401k in US. and I think TFSA is like Roth IRA. RESP is like 529 plan in US (for education)

Honestly, I am not sure how to project my expenses for retirement. I know what my current expenses are, say 60k. I am working to creating enough passive income to cover that. Along with that, getting setup emergency fund in savings, plus RRSP/TFSA/RESP (for kids)

Also, isn't plans like RRSP (401k), TFSA etc will be way too in future and also depends on how market behave at that time? if things like 2009 occurs again, people will loose everything they had for their retirement.

I do qualify for Canadian SS. But that depends on how many years I work.

How you do say we can calculate retirement funds or kind of make sure we are good in retirement?
retireby45 is offline   Reply With Quote
Old 05-29-2019, 06:41 PM   #6
Dryer sheet aficionado
 
Join Date: May 2019
Posts: 34
Quote:
Originally Posted by NgineER View Post
First off welcome to the forum!

I like you, plan to use rental properties for income generation and wealth accumulation. I have four properties right now generating a net of $22k/year after setting aside/spending 50% of rent gross and paying off mortgages.
Is your net $4000/month? Are they SFH or Multis? I assume 50% of rental income goes to expenses averaged over the long term, but I have not seen any of those lumpy capital expenses yet and my vacancies have been low.
If your net is $4k going to $8k I would go ahead and pull the plug at your mentioned time line based on rental income. I would however favor accumulating more properties rather than paying them off. I find that the return appears to be the same but with more benefits to having additional properties and deductions leveraging other peoples money.
I would be concerned managing these properties from afar however, it will most likely drive your costs up.
Thanks for your feedback. The net from rental properties are, in average, $3500 range. 2 multi and rest are sfh.

I was planning to buy more but its getting to a point that its more of a headache to manage each property, even with property manager. Also, it kind of gets difficult to get financing since i am not in US anymore.

I also have not seen much major expenses yet (vacancies low as well), but even after say taking 30% off, i should be close to 6k per month in usd and more in cad (after all are paid off). I might buy more but lets see how things unfold.

Hopefully, something is accumulated through RRSP/TFSA but honestly, i am still more inclined to think passive income through rentals. Anything over that will be bonus.

Its good to know that i am kind of on right track. I will assess my financials little more closely in few years
retireby45 is offline   Reply With Quote
Old 05-29-2019, 06:41 PM   #7
Dryer sheet aficionado
 
Join Date: May 2019
Posts: 34
Quote:
Originally Posted by Mdlerth View Post
Go to the Other Income/Spending tab, and at the bottom enter your rental income as a pension.

And also, welcome to a fine, fun place. Plenty of smarter (and better-looking) folks here will give you additional pointers. Meanwhile, I look forward to your future posts.
Thanks :-)
retireby45 is offline   Reply With Quote
Old 05-29-2019, 07:26 PM   #8
Thinks s/he gets paid by the post
HNL Bill's Avatar
 
Join Date: Dec 2017
Posts: 1,599
Quote:
Originally Posted by harpreethwalia View Post
Also, isn't plans like RRSP (401k), TFSA etc will be way too in future and also depends on how market behave at that time? if things like 2009 occurs again, people will loose everything they had for their retirement.

...How you do say we can calculate retirement funds or kind of make sure we are good in retirement?
If one held diversified mutual funds or ETFs in 2009, and held tight (not panicking and selling), then they did not lose everything. I lost, initially about 50% of my investment value (on paper), but the loss was temporary since I didn't sell, and since then, all of my investments recovered nicely, and are now worth 100%+ more than they were right before that crash (or so).

In answer to your second question, I'd say it starts with creating a budget (or tracking your spending), calculating health care costs, discretionary costs, etc. Then look at your anticipated income (rentals, etc.), and figure out your tax liability. Your income less your expenses should be a positive amount at retirement, with some contingencies built in. At first glance, it looks like you should have no problem with cash flow by the time you hit your target date, but only time will tell.
__________________
Balance in everything.
HNL Bill is offline   Reply With Quote
Old 05-29-2019, 08:14 PM   #9
Dryer sheet aficionado
 
Join Date: May 2019
Posts: 34
Quote:
Originally Posted by HNL Bill View Post
If one held diversified mutual funds or ETFs in 2009, and held tight (not panicking and selling), then they did not lose everything. I lost, initially about 50% of my investment value (on paper), but the loss was temporary since I didn't sell, and since then, all of my investments recovered nicely, and are now worth 100%+ more than they were right before that crash (or so).

In answer to your second question, I'd say it starts with creating a budget (or tracking your spending), calculating health care costs, discretionary costs, etc. Then look at your anticipated income (rentals, etc.), and figure out your tax liability. Your income less your expenses should be a positive amount at retirement, with some contingencies built in. At first glance, it looks like you should have no problem with cash flow by the time you hit your target date, but only time will tell.
Thanks for input. Quick thing, I have just started my TFSA (like tax free savings account) with Fidelity Index fund. Target is long term, 10+ yrs. The index funds tracks S&P 500. Is it ok to go aggressive right now since my time frame is long term and change to more debt once I am closer to my retirement age, 45?

Also, to second point, I did rough calculation as to what I will need during retirement age time.

Expenses/year - 60-65 k (Will be easily covered by passive income through rental properties)
Healthcare - Pretty much covered as I am now in Canada
Emergency funds - This will be in 200k (USD)
RRSP/TFSA - Invested money will be used in retirement. Since I might not be working, so basically will be in lower tax bracket. We have started this year only and will try to max out for next 10 yrs
RESP - Investment for children education. We have started this year only and will max out each year till 45 age (another 10+ yrs)
Pension: Little will come from Canada SS

I rely on rental money for now because I know and can calculate how much exactly I will get each month and can calculate the same for future as well.

Everything else is like time will tell if my investments are fruitful or not.
retireby45 is offline   Reply With Quote
Old 05-30-2019, 11:08 AM   #10
Full time employment: Posting here.
Offgrid Organic Farmer's Avatar
 
Join Date: Feb 2018
Location: An Un-Organized Township of Maine
Posts: 566
Welcome to the forum.

Most posters here do not think highly of rental real estate.

I have done very well with rentals, they remain my primary investment.

I have a 2-year military pension.

I wish you luck
__________________
Retired at 42 and I have been enjoying retirement for 18 years [so far].
Offgrid Organic Farmer is online now   Reply With Quote
Old 05-30-2019, 11:16 AM   #11
Dryer sheet aficionado
 
Join Date: May 2019
Posts: 34
Quote:
Originally Posted by Offgrid Organic Farmer View Post
Welcome to the forum.

Most posters here do not think highly of rental real estate.

I have done very well with rentals, they remain my primary investment.

I have a 2-year military pension.

I wish you luck
Thanks Offgrid. How do you say one should calculate retirement income through properties to see where he/she stands on his/her retirement track? I see myself netting close to 7k/month after all expenses (which seems pretty good considering other investments). But its still 10 yrs down the line for me and I don't know what else I am not including in my calculation.

TIA
retireby45 is offline   Reply With Quote
Old 05-30-2019, 11:40 AM   #12
Full time employment: Posting here.
Offgrid Organic Farmer's Avatar
 
Join Date: Feb 2018
Location: An Un-Organized Township of Maine
Posts: 566
Quote:
Originally Posted by retireby45 View Post
Thanks Offgrid. How do you say one should calculate retirement income through properties to see where he/she stands on his/her retirement track? I see myself netting close to 7k/month after all expenses (which seems pretty good considering other investments). But its still 10 yrs down the line for me and I don't know what else I am not including in my calculation.

TIA
Depends a lot on your cost-of-living.

The idea behind depreciating 1/27.5 each year is reasonable. Rental real estate does in fact fall apart from use. I have found that I need to make Capital Improvements every year, roughly equal to twice the depreciation. Bumping the cost-basis up more than how much my depreciation drops the cost-basis.

The last thing you want is to suddenly be hit with some huge expense you had not budgeted for.

But I also do not want my cost-basis to ever get very low.

Keep your buildings in good shape, inspected and up to code in all respects. [here in my state, an apartment building recently caught on fire and tenants died. The building had not been kept up-to-code, so they charged the landlord with manslaughter. He is in prison.]

If you are netting $7k/month after all that. Then you must ask yourself, can you live on $7k a month? $84,000/year.

If the answer is yes, you can live on that. Then the only thing remaining is to pay off any mortgages.

In 2008/2009, the Recession caused all my tenants to lose their jobs. I still had an outstanding mortgage. Servicing that mortgage quickly consumed all cash I had available. It ruined me.

I am back in the game now because I spend less than how much I have coming in.

Before you try to live solely on your rental income, consider what happens if another Recession hits and all your tenants lose their jobs.

If you have zero debts, and $7k/month net income, and if you can live on $80k/year, then you can retire right now.
__________________
Retired at 42 and I have been enjoying retirement for 18 years [so far].
Offgrid Organic Farmer is online now   Reply With Quote
Old 05-30-2019, 01:43 PM   #13
Thinks s/he gets paid by the post
HNL Bill's Avatar
 
Join Date: Dec 2017
Posts: 1,599
Here's a comparison (attached) of some things to consider when thinking about being a landlord vs. investiging in the markets. A portion of this came from an excellent web page I found, which discusses the topic including different countries.

https://www.biggerpockets.com/blog/r...ks-performance
Attached Files
File Type: pdf Real Estate Vs Equities.pdf (77.9 KB, 4 views)
__________________
Balance in everything.
HNL Bill is offline   Reply With Quote
Old 05-30-2019, 01:44 PM   #14
Full time employment: Posting here.
 
Join Date: Nov 2013
Posts: 545
Quote:
Originally Posted by retireby45 View Post
Thanks Offgrid. How do you say one should calculate retirement income through properties to see where he/she stands on his/her retirement track? I see myself netting close to 7k/month after all expenses (which seems pretty good considering other investments).
TIA
Quote:
Originally Posted by Offgrid Organic Farmer View Post
I have found that I need to make Capital Improvements every year, roughly equal to twice the depreciation. Bumping the cost-basis up more than how much my depreciation drops the cost-basis.

The last thing you want is to suddenly be hit with some huge expense you had not budgeted for.
I would not consider a single year (or a couple of years) as a baseline for my net. I think it is a fairly well established rule-of-thumb that half of your rent gross will go to covering expenses over the long term, so that is what I would use as a basis for retirement income. Hopefully you can raise rents with inflation and keep that up. Next your mortgages if any need to come out of your 50% net and the rest I would consider cash flow.

In my calculations I use my gross annual expenses for living life and subtract out the net income from rents to calculate how much investments I need outside of real estate.

Living expenses - net cash flow (50% rule) = living expenses I need to cover from investments
NgineER is offline   Reply With Quote
Old 05-30-2019, 02:17 PM   #15
Dryer sheet aficionado
 
Join Date: May 2019
Posts: 34
Quote:
Originally Posted by HNL Bill View Post
Here's a comparison (attached) of some things to consider when thinking about being a landlord vs. investiging in the markets. A portion of this came from an excellent web page I found, which discusses the topic including different countries.

https://www.biggerpockets.com/blog/r...ks-performance
Good Stuff. Thanks
retireby45 is offline   Reply With Quote
Old 05-30-2019, 02:33 PM   #16
Dryer sheet aficionado
 
Join Date: May 2019
Posts: 34
Quote:
Originally Posted by NgineER View Post
I would not consider a single year (or a couple of years) as a baseline for my net. I think it is a fairly well established rule-of-thumb that half of your rent gross will go to covering expenses over the long term, so that is what I would use as a basis for retirement income. Hopefully you can raise rents with inflation and keep that up. Next your mortgages if any need to come out of your 50% net and the rest I would consider cash flow.

In my calculations I use my gross annual expenses for living life and subtract out the net income from rents to calculate how much investments I need outside of real estate.

Living expenses - net cash flow (50% rule) = living expenses I need to cover from investments
Thanks for this. Keeping this also in mind, I should be good atleast carrying my expenses through rental properties. Expenses (65k CAD) - Rental (50% rule) 80k CAD (60k USD) = -15k

I am also 10 yrs away for my retirement age, so keep putting things in investment accounts plus get my properties debt free.
__________________

retireby45 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
Anyone retire or plan to retire outside of USA? ER Man Life after FIRE 9 10-01-2011 02:50 PM
New member looking to retire next year chemist Hi, I am... 25 08-08-2011 10:06 AM
Looking for my ER Plan Member Opinions observer Hi, I am... 17 12-08-2010 08:10 PM
New member - new job - kids in high school Wormrider Hi, I am... 14 11-28-2009 08:11 PM
New member new 7 figures hayekcapitalist Hi, I am... 40 08-30-2007 11:39 AM

» Quick Links

 
All times are GMT -6. The time now is 10:21 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
×