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-   -   Change In Plans, Need Advice (http://www.early-retirement.org/forums/f28/change-in-plans-need-advice-36733.html)

potto0213 06-28-2008 09:41 AM

Change In Plans, Need Advice
I am 57, wife is 54. Here is our current financial situation:

Tax Deferred Assets:

460K in T. Rowe Price Retirement 2010 (My SEP-IRA)
22K in Fidelity Balanced (Wifes 403B) (Potential to grow to 60K, see below).
8.5K in HSA Account

Taxable Assets:

120K in Vanguard 500 Index
151K in Fidelity Money Market Account
10K in Savings Account

House with approx. 220K is paid in full. No debt.
Wifes Health Insurance cost $100/month through her pension. I pay $167 month for a High Deductible Heath Insurance plan with HSA through Anthem. This has being increasing about 15-20% per year.

Wife is retired and draws a pension of approximately 40K/year.
This pension gets an automatic 3% increase each year.
1K each month is added to wifes 403B for the next 3 1/2 years as
part of a buyout. Event with 0% growth, this account shold be valued at 60-65K at that time.

Original Plan:

I originally planned to ER in 2 years at age 59. I was planning on using the 151K in the money market account to "bridge" the gap between age 59 and 66. At that time I should be eligible for approx. 2K in Soc. Sec. This would bring income string to 64K/year which I think would be comfortable. I would then use other resources to supplement any major $ expenses but hope to let it sit for the most part.

New Plan:

Our son recently married and we anticipate grandchildren in 2 - 3 years. We live 350 miles away. Wife and I would like to be able to enjoy the grandkids on more that just a gradual basis. We are thinking of buying a condo near my son's area that we could use 1-2 weeks per month. My son lives in an area that has been rated 1 of the 10 best places in the US to retire by Money magazine in 2 out of the last 5 years so I see other advantages. I am guessing the cost of this condo would be 175-200K. Plus of course the other expenses that go with owning property. This is in an area that has been fast growing, but of course it has been affected by the real estate downturn. It is a much faster growing area that we live in however.

My question for you ER people is this: Does this seem to be a reasonable thing to do? If so, how would you recommend us tapping our resources to pull this off. I had hoped to do at least some traveling after I retired and really don't want to give that up but I guess I'd be willing to do less of that if necessary.

Brat 06-28-2008 10:16 AM

Those grandbabies will likely take a year or two to arrive and you are planning to retire in two years. I would plan to sell my house upon retirement and move near your son's community. With a condo there you could travel too.

Two years fly by and you will have enough time to research condos in the area so that when you have sold your house you know what you want.

crazy connie 06-28-2008 10:23 AM

What is your current income and expenses? You have enough to buy the condo but it will rape the after tax accounts. Can you do a short term mortgage and pay off before retiring? That depends on your current income and expenses. Can you buy and make payments post-ER? Do you want to? Will you keep the current home for as long as alive? Or, will you downsize to the condo fulltime? Choices aren't they great?

Moemg 06-28-2008 10:41 AM

I am wrestling with the same problem . Will you be driving or flying there once a month ? That and the second house is going to eat up a lot of your savings . What about either selling your house and moving near your son or renting a condo for a three month stretch .

2B 06-28-2008 01:21 PM

Go to FIRECalc and run your numbers. I think you can retire today.

Based on your nominal $1MM in assets (including selling your current abode), you can withdrawl $40K per year and adjust upward for inflation. Add that to your wife's pension and you get $80K which is safely above the $64K you say you need. That would assume you would become a renter which may be the best thing for you to do for a year or two while moving into a new area. If you rent for $1K/mo, you are still under the $80K/yr. When SS kicks in, you are in great shape.

You could buy something now. With $800K you would generate $32K/yr. That brings you up to $72K which is again over your magic $64K.

Am I missing something? Plug your details into FIRECalc and see what it estimates for your 95% success rate retiring today. I think that with the pension and social security FIRECalc will give you a nominal inflation adjusted spending of almost $90K (before tax).

potto0213 06-28-2008 01:36 PM

Thanks for the responses so far.

To answer some of the questions raised:

I currently bring home about 55K/year, add to this my wife's pension.

Selling our current home isn't part of our plans since we both have elderly widowed mothers lioving near by ages 86 and 93. We both are the primary caretakers. Also, all our friends and family are close by. I won't say selling our house is off the table but not in the near future.

We are planning on driving back and forth between our home and the new condo.

I am certainly willing to entertain any ideas that people have.

Is it better to rent rather than buy?
If I buy is it better to purchase outright rahter than get a mortgage?
If I purchase outright is it better to use the money from the money markets or to tap the SEP-IRA?

as you may notice, I am cursed by being fiscally conservative. I had a plan all set and changing it makes me nervous.

Thanks again to all that reply.

2B 06-28-2008 01:56 PM


Originally Posted by potto0213 (Post 676054)
Thanks for the responses so far.

Is it better to rent rather than buy?
If I buy is it better to purchase outright rahter than get a mortgage?
If I purchase outright is it better to use the money from the money markets or to tap the SEP-IRA?

Run FIRECalc.

IMHO I think you would be much better off renting if you intend to keep your current residence. Since it is a great retirement destination, I suspect there are a large number of condos available by the week. If you really split your time there 50/50 you could get an apartment. I don't think your finances would do so well if you cut out $150K+ for a new place.

If you must buy, you should consider a mortgage so as to not cramp your cash flow.

You can also turn this around and, after a suitable rental period to learn the area, buy your home in the new location and either plan on living with one of the moms or get a small apartment close to them.

Based on your attraction to your current location, I suspect you will primarily be where you are currently living. I don't believe your finances will successfully handle comparable homes in both locations. If you are really going to be gone from either place 50% of the time why maintain any "permanent" home. There isn't any reason you can't downsize at one or both.

Brat 06-28-2008 03:34 PM

We faced much the same situation, shopping for a studio condo. We ended up buying a small travel trailer and parking it where we could get power, water and potty service thinking we would only use it for a couple years. Because of the cost of fuel odds are used travel trailers are a glut on the market. Even if the re-sale value of the trailer goes to $0 it won't be long before you are $$ ahead. Based on our experiance consider a fiberglass unit, leaks are easier to fix.

I call it our 'mother-in-law' apartment.

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