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our retirement budget, please critique
Old 07-19-2015, 12:05 PM   #1
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our retirement budget, please critique

Retirement Living Budget
per month per year
$1,362.21 $16,346.52 house 19 mortgage 4.625%
$306.82 $3,681.84 house 19 prop tax
$51.25 $615.00 house 19 prop insurance
$154.17 $1,850.00 house 19 flood insurance
$250.00 $3,000.00 electric
$150.00 $1,800.00 natural gas
$300.00 $3,600.00 2 cell phones, internet, & tv
$26.00 $312.00 trash
$125.00 $1,500.00 3 cars insurance
$75.00 $900.00 3 bike insurance
$35.65 $427.82 rv insurance
$33.33 $400.00 boat insurance
$10.50 $126.00 3 cars dmv reg.
$10.50 $126.00 3 bike dmv reg.
$13.58 $163.00 rv dmv reg.
$3.50 $42.00 boat trailer dmv reg
$3.50 $42.00 car trailer dmv reg
$5.00 $60.00 boat reg
$100.00 $1,200.00 wine
$800.00 $9,600.00 food
$500.00 $6,000.00 gas
$300.00 $3,600.00 clothing
$533.33 $6,400.00 pet care
$100.38 $1,204.56 2 dog insurance
$18.00 $216.00 netflix
$500.00 $6,000.00 my health insurance
$25.00 $300.00 my health care out of pocket expense
$327.00 $3,924.00 dw's health insurance
$416.66 $5,000.00 dw's health care out of pocket expense
$250.00 $3,000.00 tax prep / accounting
$500.00 $6,000.00 entertainment
$1,000.00 $12,000.00 misc. supplies & hobby's
$33.33 $400.00 umbrella insurance
$122.39 $1,468.65 rental 2 costs
$121.89 $1,462.65 rental 3 costs
$460.32 $5,523.85 rental 5 costs
$9,024.31 $108,291.89 total expences
$9,166.67 $110,000.00 total net cash wanted

$401.52 $4,818.18 my h.s.a. account ($53,000 / 11 years)
$75.76 $909.09 dw's h.s.a. account ($10,000 / 11 years)
$919.00 $11,028.00 dw's ss @ 66
$41.67 $500.00 10k @ 5% brokerage account
$2,065.29 $24,783.43 rental 1 @ $4,155 rents
$576.09 $6,913.09 rental 4 @ $1,755 rents
$843.43 $10,121.13 rental 9 @ $1,000 rents, no mortgage
$824.24 $9,890.90 rental 10 @ $1050 rents, no mortgage
$691.46 $8,297.47 rental 11 @ $900 rents, no mortgage
$648.32 $7,779.83 rental 12 @ $880 rents, no mortgage
$740.91 $8,890.87 rental 13 @ $950 rents, no mortgage
$692.75 $8,313.04 rental 14 @ $850 rents, no mortgage
$688.84 $8,266.06 rental 15 @ $1,950 rents
$344.79 $4,137.51 rental 16 @ $1,050 rents
$400.00 $4,800.00 rental 17 @ $400 rents, no mortgage
$244.04 $2,928.51 rental 18 @ $1,150 rents
$692.87 $8,314.43 rental 19 @ $875 rents, no mortgage
$231.58 $2,779.01 rental 20 @ $900 rents
$1,253.82 $15,045.87 rental 21 @ $1,575 rents, no mortgage
$1,244.91 $14,938.92 rental 22 @ $1,600 rents, no mortgage

$13,621.29 $163,455.34 gross income
-$3,000.00 -$36,000.00 less rental repairs, loss, vacancy, etc.
$10,621.29 $127,455.34 gross taxable income
$2,124.26 $25,491.07 income taxes (20%)
$500.00 $6,000.00 note payment income for 24 months
$8,997.03 $107,964.27 net income

-$169.64 -$2,035.73 (shortfall)

98.15% of total cash wanted

options: use cash in bank to pay off 401k loan or buy 1 or 2 more rentals that will
cashflow as shown below:

$926.48 $11,117.76 401k loan payment (approx. 38k balance)

$790.83 $9,491.01 possible rental 23 @ $1,050 rents, no mortgage
$328.52 $3,942.27 possible rental 24 @ $1,150 rents, with 80k mortgage
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Old 07-19-2015, 12:16 PM   #2
Recycles dryer sheets
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i know that is hard to read as it was created in an excell spreadsheet.
notes: rental incomes are net after paying mortgages (if any), taxes, insurance, & property mgt. fees.
i am 48, dw is older.
i have 1.15m in 401k & ira's that i can use if needed in 11 years.
no other debt other than 10 mortgages & 38k of 401k loan.

i have had the same job for 31 years & hate it & want out soon. i will not get a pension.
rentals 2, 3, & 5 are currently for sale as they do not cash flow for various reasons.
when they sell we will get approx. 150k net cash from them to reinvest.

i am really scared as i do not think i am quite there. i don't know what my taxes will be once i quit my job & live off passive income only.

health care & insurance is a big scary monster that i am afraid of as well as my work always paid all the costs.

so, i think i am close, can i pull the trigger soon?
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Old 07-19-2015, 12:28 PM   #3
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Are you discounting the yearly rentals by 1 month, because when someone leaves there is a good chance you will have it empty for a month or even more some of the time.

Also does your umbrella cover the rentals ? if so its nice and cheap.

I would consider paying off the 401K loan, because whoever has it in their name is trapped in their job by the loan. Should that person lose/quit their job, the loan will be treated as withdrawal with 10% penalty (and push you into a higher tax rate).

By the way rentals are great when working, but you are going to find yourself in trouble when retired. The mandatory depreciation you take saves you at your marginal tax rate (I hope its 25% or more right now). But when retired your marginal rate could easily fall to 15% and you will still be depreciating the rentals (saving 15% taxes) Then when you sell a rental unit, you will be recapturing the depreciation at 25% (paying an extra 10% on all the depreciation you take when retired).
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Old 07-19-2015, 12:43 PM   #4
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It might be easier for us to read if you just post a screenshot of the excel table instead of the text you pasted.
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Old 07-19-2015, 12:58 PM   #5
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sunset, i factor in vacancy with the repairs @ 36k / year.
my tax rate is closer to 20% now.
thanks for bringing up the depreciation, i hadn't thought of that. i tend to buy another property whenever i sell one. if the capitol gains warrant it i use a 1031 exchange to defer all taxes.

soupcxan, i don't know how to do a screenshot on a pc.

also of note: when rentals 2, 3, & 5 sell it will lower our annual costs by $8,455 which will feel like getting a raise, or adding a comfort level.
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Old 07-19-2015, 02:07 PM   #6
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I don't know about rentals. I'll just comment on the expenses.
The best expense plan is always based on your detailed records of your actual spending for the last few years. This may be the source of your spreadsheet, but I'm missing some categories that most people have. For example, here are average expenses for retired, married, homeowners in "Household operations"

1,806 .. House maint, repairs, flooring
1,265 .. Smal appl, misc HH eq & textiles
874 .. Housekeeping services
430 .. Furniture
611 .. Other housekeeping supplies
359 .. Cleaning Supplies
282 .. Major appliances
5,627 .. Subtotal

I couldn't find them in your budget.

Here are some more:
3,961 .. Cars, net purchase + lease
1,085 .. Car maint & repairs
2,769 .. Gifts to Fam & Friends
2,549 .. Tax deductible contributions
421 .. Personal care services
385 .. Personal care products
3,282 .. Other Miscellaneous
14,452 .. Subtotal
I'm sure that some of the items buried in "Other Miscellaneous" don't apply to you. But, I'd expect most people to budget something for auto maintenance, repair, and replacement.

That's $20,000 that other people spend that you could think about.

Here are the expenses you listed, with the averages for other retired couples. I'm sure you already know that you are higher in most categories, with "toys, pets, hobbies" extra high. Nothing wrong with that as long as you have the income to support them. Your annual expense is in the first column, the average is in the second. I removed a few of the expenses on your list because they looked like "income generation expenses" rather than "consumer expenditures".

16,344 13,564 .. $1,362.21 $16,346.52 house 19 mortgage 4.625%*
3,682 3,071 .. $306.82 $3,681.84 house 19 prop tax
615 611 .. $51.25 $615.00 house 19 prop insurance
1,849 0 .. $154.17 $1,850.00 house 19 flood insurance
3,000 1,633 .. $250.00 $3,000.00 electric
1,800 740 .. $150.00 $1,800.00 natural gas
312 0 .. $26.00 $312.00 trash
0 660 .. Water, sewer, trash'
3,600 2,449 .. $300.00 $3,600.00 2 cell phones, internet, & tv
3,600 1,289 .. $300.00 $3,600.00 clothing
6,000 2,346 .. $500.00 $6,000.00 gas
1,500 1,149 .. $125.00 $1,500.00 3 cars insurance
1,200 478 .. $100.00 $1,200.00 wine
9,600 6,940 .. $800.00 $9,600.00 food
6,000 4,623 .. $500.00 $6,000.00 my health insurance
3,924 above .. $327.00 $3,924.00 dw's health insurance
300 2,188 .. $25.00 $300.00 my health care out of pocket expense
4,999 above .. $416.66 $5,000.00 dw's health care out of pocket expense
27,980 5,392 .. Entertainment, hobbies, travel, pets
400 0 .. $33.33 $400.00 umbrella insurance
126 0 .. $10.50 $126.00 3 cars dmv reg.
96,831 47,133 .. Total in KH61 budget
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Old 07-19-2015, 02:57 PM   #7
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You are not even close to a LBYM lifestyle with those kinds discretionary monthly expenses. You live pretty high on the hog from that spreadsheet. I could easily cut that in half and be living simply, happier and more freely. Ymmv


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Old 07-19-2015, 04:22 PM   #8
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Quote:
Originally Posted by Al in Ohio View Post
You are not even close to a LBYM lifestyle with those kinds discretionary monthly expenses. You live pretty high on the hog from that spreadsheet. I could easily cut that in half and be living simply, happier and more freely. Ymmv


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i am retiring from a 230k+ salary position (+ the rental income we currently generate) so i haven't had to really do much budgeting for the last 20 years, but i have been buying all the toys i want to play with in retirement. big diesel motorhome, fishing boat, a few antique harleys, rzr, guns, tools, machinery, etc. etc.
i actually live well below my means & buy everything used (never bought a new car or harley).
the numbers in my spreadsheet are actual numbers of what we currently pay or make.
when looking at most other peoples spreadsheets i seldom see taxes & various insurance costs as line items. those are my biggest worries.
as for car repairs & maintenance, that is one of my hobbies so i carry the cost in that category.
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Old 07-19-2015, 05:05 PM   #9
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I think you're close, but as you suggested, I am having a hard time reading your budget.

What is your total rental income, net of mortgages?

Is the $36,000 really adequate to cover maintenance and missed rental income on 20 houses, or however many you own?
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Old 07-19-2015, 05:29 PM   #10
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Originally Posted by knucklehead 61 View Post
i am really scared as i do not think i am quite there.
What we did was compare our budget to the Consumer Expenditure Survey and cut back where we were high and not due to a reasonable or explainable cause (like higher housing costs or travel due to family visits). We just looked at the budget and said would we rather work full time and spend X or not have to work any more. A lot of the Xs didn't seem too important compared to living a life of leisure and no financial stress. We cut out a lot of stuff we never missed and a lot of other budget items we were overspending on or simply getting overcharged.
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Old 07-19-2015, 06:08 PM   #11
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Originally Posted by Slow But Steady View Post
I think you're close, but as you suggested, I am having a hard time reading your budget.

What is your total rental income, net of mortgages?

Is the $36,000 really adequate to cover maintenance and missed rental income on 20 houses, or however many you own?
total rental income net of mortgages is $153k

36k may be a bit low as we bought 2 more duplexes in the last month.
i think i should up it to 40-45k for budgeting purposes.
when i retire we will move to the town where most of our rentals are located,
which will allow me to do most of the repairs & maintenance myself instead
of hiring it out like we have to now as we live 550 miles away.
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Old 07-19-2015, 06:28 PM   #12
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Originally Posted by knucklehead 61 View Post
sunset, i factor in vacancy with the repairs @ 36k / year.
my tax rate is closer to 20% now.
thanks for bringing up the depreciation, i hadn't thought of that. i tend to buy another property whenever i sell one. if the capitol gains warrant it i use a 1031 exchange to defer all taxes.....
Using the 1031 is just kicking the can down the road, and the problem will still be there only larger.

Your grouping of vacancy factor plus repairs is odd and I think you are deluding yourself with it.

If you factor vacancy at $800 per unit that's about 16K (once you have this stash you can reduce this to replacement amount yearly as needed).

Then the repair budget should be minimum 2K/unit as although you won't spend it all in one year, for example the next year 3 furnaces and 2 AC's plus 2 roofs will need replacing.
So your repair budget should be 40K (and bank the cash that is not spent unless you have incredible lines of credit, as someday you will spend it)

Do you do your own taxes or have an accountant do them ?
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Old 07-19-2015, 06:32 PM   #13
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Looks extremely complicated to me with boats, cars, RVs,, rentals, motorcycles. I wouldn't want that much maintenance and insurance in my life. That being said the numbers look fine to me except the pet expenses seem high.
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Old 07-19-2015, 06:51 PM   #14
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Taxes look a bit high...have you done a pretend tax return as if you were retired and didn't have wages?
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Old 07-19-2015, 07:22 PM   #15
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soupcxan, i don't know how to do a screenshot on a pc.
If you have Windows 7 there is a built in "Snipping Tool" in the start menu that will do it.
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Old 07-20-2015, 12:15 AM   #16
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Looks extremely complicated to me with boats, cars, RVs,, rentals, motorcycles. I wouldn't want that much maintenance and insurance in my life. That being said the numbers look fine to me except the pet expenses seem high.
your right, high maintenance for sure.
one of my hobbies is rock crawling with my jeeps & i have 3 of them.
we have a big diesel motorhome & travel in it about 5 weeks a year now & will use it a lot more once i am retired.
i have a fishing boat & a polaris rzr, as well as 7 antique & a 82 & 90 harley & enjoy restoring the antiques ones. also have an excavator, skid steer, bulldozer, & a golf cart, & a work truck. too many motorized toys.
i can cut expenses if i don't register or insure some of them on certain years if needed.

the pet expenses are what we actually pay now. we have two rottweilers & they are like our kids as i don't have any. they travel with us everywhere we go (unless we leave the country).
my rottie goes to my office with me every day.
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Old 07-20-2015, 10:51 AM   #17
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we have a big diesel motorhome & travel in it about 5 weeks a year now & will use it a lot more once i am retired.
I just purchased a big diesel motorhome and am budgeting future expenses. I don't see line items for service, repairs, fuel or campground fees. These amounts can easily exceed $5000 annually.

Maybe this is a part of your hobby budget.
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Old 07-20-2015, 11:20 AM   #18
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Independent :


Where did you pull the average expenses for retired folks? Is this household expenditures?


Thanks!!!
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Old 07-20-2015, 11:27 AM   #19
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Hello KH61,

I'd be curious to see a net worth figure given all your rental properties. You certainly have chosen a real estate heavy asset allocation. Some think managing a 3-Fund portfolio is a lot of work, but managing 20+ properties surely looks like too much work to me in addition to the stress of keeping a high occupancy rate and managing maintenance.

You certainly don't live a frugal lifestyle so there appears to be plenty of room to scale back if you needed to. The question is are/will you be able to if needed. People are creatures of habit and you could find yourself in a regrettable situation if you are not able to cut back if/when required. After 2 years of ER with 3 kids still at home, I firmly believe it's all about managing expenses.

Good Luck with your decision.
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Old 07-20-2015, 11:45 AM   #20
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Managing 20+ rentals is a lot of work! I don't think I can handle it, even if I contract a lot of work out.

But then, I am a lazy guy, nor can handle stress well. That's why I ER'ed.
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