a 2 year check up. Are we OK?

[mojavesue]

Hello everyone. First time sharing details. We retired fully a couple of years ago.
Ages 56 and 58 no debt no kids

taxable acct 2.6 mil
pretax 500k
Those accounts are about 65/35 equities to bonds CDs and MM cash

Real estate
primary home 550k no mortgage
Rental house 250k been rented to same tenant for the last 10 years. Provides about 9k income after expenses. No mortgage
Second home 450k. Was a rental but currently using as vacation home. Plan is to either re rent or sell in the next year or two. No mortgage.

Expenses are between 70k and 80k a year. Does not include big lumpies, but still some fat. We do travel in the US a few times a year.

Social Security will come at 62 for me and 67 or 70 for DH. I have a diagnosis of Rheumatoid arthritis that is currently under control. We get our insurance through the ACA and so far has been very good for us.

Firecalc and other planners say we are fine. But lately have been worried about future returns and expenses. I dont have anyone close to us that I trust to share our plan with.

 

[DJRR]

I think you are in very good shape. A couple of things that may help ease your anxiety:

1. We had a bear market last year (20% drop) that also hit the bond market really hard and you made it through. Bond yields are higher now, so it is unlikely to have a repeat in the near future unless you hold very long term bonds.

2. Worst case, SS is 14 years away. $3.1M financial assets/14 = $221, 428 per year. Even if you earn $0 interest you can pay your bills until SS. Then you will have a real estate portfolio of over $1M to sell, buy a cheaper place for cash, and refill your portfolio.

3. Healthcare fear is real, but if you are happy with ACA I think you will be fine until Medicare. If you are really concerned it might ease your mind to make a "healthcare" bond ladder that provides a "guaranteed" amount of money each year until Medicare. You could also look at an annuity that pays a fixed amount, but those tend to have higher fees.

My honest opinion is that you should be more worried about who you want to leave a legacy/inheritance to vs. running out of money. You have done a great job and should enjoy the fruits of your hard work.

 

[pb4uski]

You're golden. Even ignoring SS your top end spending of $80k is only 2.6% of your $3.1m in financial assets.

$9k of income after expenses doesn't seem like much for a $250k rental house... only 3.6%. Is the $9k of income after depreciation? Is the rent significanlty below market?

 

[mojavesue]

@DJRR Thank you for the detailed and thoughtful response. I really appreciate it.

 

[mojavesue]

@ pb4uski. Yes, the rental is under market a bit. We paid 80k for the house 10 years ago as a foreclosure and have had the same tenant during that time. We've only bumped him once for 100 dollars a month. He's paid the house off for us and has been a great tenant through the years. The value has tripled in that time. He's an older single retired gentleman and we don't really want to raise his rent too much. I guess at this point he's half charity for us! We may sell the house in a few years if we decide to move away from the area.

 

[pb4uski]

^^^ You sound like a friend of mine. He hadn't increased his dependable tenant's rent in 10 years! I finally convinced him to do small annual increases until he is at 90% of market. At 10% off market the tenant isn't going to bother to move.

 

[old medic]

He hadn't increased his dependable tenant's rent in 10 years!

LOL... We rented a house in 1986... $50/month... we tried to buy it back then, but the Lady planned on building her retirement home there. We built a place and moved out, my brother moved in...
Fast forward to 2018... We ended up buying the place from her. My brother was still paying $50 a month.