Years - or months - to go?

[Sheryl]

Since 3 Yrs to go's* "years to go" thread had already wandered from topic before I got my two cents in, I thought I'd start a new one.* I like hearing who's getting close and what they're thinking about as the time approaches.

I've set my goal at somewhere around this time in 2008.* *I was thinking end of 2007 - but if the profit sharing situation looks good, I'll want to stay around for that cash cow.* However if the stress and bull$&(# level continues like it has lately, I'll bump that up to this time in 2007.

As far as the magic number, this year's profit sharing will get it down into 5 figures.* (I count backwards, as in, "How many more dollars do I need?").* *I'm pretty confident that much money can be hoarded up in 12 mos. as long as the market doesn't really go backward, and as long as I don't*freak out and by a fancy new car.

I count a few things in my "magic number" that are not purely cash or investments.* What do others think about this?

(1) the equity in SO's house - it will be rented out for the foreseeable future and the rent pays mortgage and taxes.* We figure as long as the house value rises more than inflation, why sell now?* We don't need that cash right away. (And even if prices stabilize, I very seriously doubt they will drop).* This house is in a very desirable retirement location, on a golf course.* Should increase nicely.* If we never really need the cash we might chose not to sell, and to live there instead of here, when we're too old to travel so much... it allows for various options to remain open.

(2) I count my portion of the current death benefit value of a life insurance policy on my dad that is held in an ILIT (Irrevokable Life Insurance Trust).* The only way it can go away is if the trust doesn't pay the premiums, and my brother and dad and I control that decision, so there is little likelihood of this disintegrating.* Dad's 78 and relatively healthy, so I don't really know when I'll see that money, but I'm pretty sure it will be in the next 20 years. I'm not in a hurry.* ** *One concern is that over a longer term the $ of the benefit will not appreciate as much as other investments, and loose ground to inflation, but it is split into two policies, one is fixed dollar, the other tied to market earnings to minimize that risk.

Even without the liquidity of those two items, and without access to retirement $ for at least 9.5 more years (or until we start a 72t withdrawal) we should be fine for the foreseeable future.

Those two items are about 35% of our total "stash."* Am I missing some critical point that could bring down this house of cards?!?!?

(Sorry for the long rambling post - need more cofee)

[brewer12345]

For the sake of conservatism, I would ignore the inheritance. CAn you still make it, perhaps with a slightly reduced budget?

Since the golf course house appears to be an actual investment, I can't see anything wrong with including its value in your stash.

[Martha]

I would count the life insurance trust assets--it is no less certain than any other investment. After all it is in an irrevocable trust. I think it just makes people a bit squeemish to count anything that is in the nature of an inheritance and the fact that you can't predict with any accuracy when you will get the funds.

I, different from many on this forum, even include the value of our home in my calculations. In an emergency, if we start to run out of money we can get a reverse mortgage or sell the house and rent.

[SteveR]

We count our "stuff" in different buckets. Each bucket has a different set of circumstances surrounding it that makes it unique to other buckets of "stuff" that could be used to generate $$$ for living expenses. The buckets also have their own unique tax issues and ease or difficulty of liquidation.

Buckets:
1. Cash and high liquid accounts-easy to get $$ for expenses-taxed like reg. income. MM, CDs, Index funds, piggy bank, couch cushion change, etc.

2. After-tax portfolios-less liquid but taxed as capital gains and dividends instead of reg. income. Returns are variable due to high equity nature of the account. Some are index funds or specality funds that could be sold off easily with very little capital gain exposure. Some are individual company stock and the cap. gains tax on some of these would be nasty.

3. IRAs-these are roll-over accounts from 401ks that will be used to provide the major cash flow in retirement. They are divided into smaller IRAs to provide an adequate but not excessive cash flow for 72Ts while allowing the other ones to grow untouched until RMDs are required. Again, taxes and cash flow determine the set up of these accounts.

4. House--got to live somewhere so this is not counted in the income stream either. We could liquidate it and move to a smaller house or rent a house if needed but that is not the main RE plan. The house will be kept until it gets to be too much trouble then we will downsize.

5. Ebay bucket. Includes all other stuff like furniture, artwork, whatever you can sell of for a few bucks. Last resort before the Little Friskies diet plan.

We have an Over the Rainbow Bucket too. This one has company stock options that we "wish" would rise above water so we can exercise them before they expire. We are not counting on them in anything but if they were to rise from the murky depths it would be a windfall.

We will not inherit anything so it is not a conderation and there is no bucket for this.

[cute fuzzy bunny]

Quote:

Originally Posted by TromboneAl I, different from many on this forum, even include the value of our home in my calculations. In an emergency, if we start to run out of money we can get a reverse mortgage or sell the house and rent.

I feel the same way. My budget sheet includes the homes current value as an asset, theres a field (currently zero) for income potential (renting rooms, renting the whole thing out), and there are fields for costs (rent=0, maintenance, etc)

i can turn that asset into cash, which will cause me to have to pay rent, or I can become a full or partial landlord.

Its sort of hard to see the logic that leads you to exclude a huge relatively liquid asset with nearly immediate income producing potential...

[kat]

I figured I'd start out with what I had in hand and ready/willing to spend: 4% of my taxable portfolio. It's not a "pension" but I call it that, because it's most solid and there for the duration.

At 60, I add in (best guess) 4% of my IRAs.

At 67, I tack on a) social security and b) the trust fund/inheritance, because Mom and Dad would be 98, and it's the earliest tolerable way to imagine it, and c) selling my house if I feel like it/need to.

I'm comfortable with the early years being the leanest, because I can always work part time hours, and already have plans to do that for a couple years. To make the early years nicer, I built up a separate maintenance/emergency/travel fund that should last awhile.

[Sheryl]

Lots of different - but all valid - ways to look at the same situation!

Steve I like the "buckets" approach. Did you get that from Ray Lucia? Your description seems more sophisticated that what he describes in his book, but same theory.

Kate, KWYM about 98 being "the earliest you want to imagine" getting the inheritance money. Every time I mention a decision involving spending money my dad gets on my case about being a miser, and says, just spend it, you'll have plenty!! But I'm not sure he realizes that you need more "plenty" to ER at 47 - he LR'ed at 77.

Al and "Jen" - I understand your point about "counting" the house you live in - it certainly is an asset. I just don't consider it as an income producing asset in my primary ER scenario. It's always in the back of my mind that it could be sold and produce another big lump of cash, but I don't want to be a PT or live in a Condo at this stage in my life, so I just keep it in mind as a possible alternative.

[SteveR]

Quote:

Originally Posted by Sherrrifer ...Steve I like the "buckets" approach.* Did you get that from Ray Lucia?* Your description seems more sophisticated that what he describes in his book, but same theory...

I made up the "buckets" as a way of describing how I see the various accounts I have for my stash. Actually, I have over 20 accounts that make up all the stuff in the buckets. I am not familiar with Ray Lucia and have not read his book. What is the title?

Buckets, bins, coffee cans, plastic bags, whatever you want to call them are all the same thing...specific stategies of savinging, investing and then spending you stash to maximize returns and minimize taxes.

[kat]

Quote:

Originally Posted by Sherrrifer Kate, KWYM about 98 being "the earliest you want to imagine" getting the inheritance money. Every time I mention a decision involving spending money my dad gets on my case about being a miser, and says, just spend it, you'll have plenty!! But I'm not sure he realizes that you need more "plenty" to ER at 47 - he LR'ed at 77.

I never even thought about my parents' money -- it's THEIRS -- until my Dad made a comment out of nowhere. I said something about a sum of money connected to something I was pondering, and Dad says......Kat, you'll be getting ten times that, more, when I'm gone, so don't worry about it.

I don't do spreadsheets, hardly did any advance planning for ER..... but every so often I puzzle over what to think about THEIR money. And the only way I was comfortable was making it an add on, extra money, like potential Social Security. So.... I put it all at age 67, which is 24 years away.

Makes me feel better.

[Sheryl]

Quote:

Originally Posted by SteveR I made up the "buckets" as a way of describing how I see the various accounts I have for my stash.* Actually, I have over 20 accounts that make up all the stuff in the buckets.* I am not familiar with Ray Lucia and have not read his book.* What is the title? Buckets, bins, coffee cans, plastic bags, whatever you want to call them are all the same thing...specific stategies of savinging, investing and then spending you stash to maximize returns and minimize taxes.* *

Lucia is one of those radio advice guys, his book is:
Buckets of Money:* How to Retire in Comfort and Safety*
http://tinyurl.com/gvc9c

His trys to make it really simple.* Have a short-term, mid-term and long-term bucket.* As you use up the short term bucket pour in the contents of the mid term, etc.* *The system worked for me, until he got to pushing annuities a little harder than it seemed necessary.* * But it was a very easy, introductory book for people without much financial savvy.

[Sheryl]

Quote:

Originally Posted by kate I never even thought about my parents' money -- it's THEIRS -- until my Dad made a comment out of nowhere.* I said something about a sum of money connected to something I was pondering, and Dad says......Kat, you'll be getting ten times that, more, when I'm gone, so don't worry about it.

Sounds just like my dad!

I just keep encouraging him to spend it. They are taking a cruise in Asia so I guess he's finally taking my advice.