Jumping in the pond at 54

[mdebluz]

Hi everyone! I am new to this world of finance after being married for 16 years relying on my X for socking away cash for our "golden" years. As I am grateful he did I now find myself responsible for taking control of my part of the settlement which is coming any time, now. I will have approximately 400 K transfered into an IRA in the next few weeks.

After lots of pondering, surfing and talking to my own accountant I have come to realize that it is all very confusing and hard to decide who has the answers!

Here is my scenario. I earn 60K a year. I am 54. My goal is to retire at 60. I am buying a property in a resort area that is with an overnight rental agency. My portion of the rental will total somewhere around 13K a year. I am able to secure 100% financing at a low interest rate with a local bank where I live. In a perfect world I would own half a dozen or so by retirement...

Here is what I understand from what I have learned in the last two days---sorry but my lingo will no where measure up to all of you seasoned investors due to the fact that I didn't feel like I needed to understand any of this before--- dumb on my part, I might add

I can open a Self Directed IRA LLC but getting a non recourse loan from my bank will be difficult as they might be concerned about repayment in case of unforeseen financial problems I may have. I also think the tax issues with the rental income being split by what I owe might be confusing, if I decide to put down a substantial down payment with part of the original IRA (of which I will get hammered with the penalty for doing so, of course).
and/or
I can roll some of it into a Roth and use the 72 (t) to get a SEPP large enough to make the payments and not use any of the original IRA to buy it. And, what by the way is the max you can earn and still qualify for a Roth? Is it 105K, and does that include everything?

I would like to send as little as possible to the Feds and the fools that are spending money like water. I feel like if I make my own bad decisions, at least they are mine, not someone else's.

Thanks for your input!

 

[RonBoyd]

Here is what I understand from what I have learned in the last two days---

There will be those who would ask, "What's the hurry?" 365 seems like a more reasonable study period than does 2. The stakes seem rather high here.

I feel like if I make my own bad decisions, at least they are mine, not someone else's.

Yeah, that would be one goal. Rather easily attained, I would guess.

 

[Lazarus]

Don't buy anything! Wait a while and think about it. There are unlimited possibilities of things you could do with money. Most of them will end with loss.

 

[travelover]

Welcome mdebluz.

I saw your earlier post and to be honest, I found it troubling that you are making big financial moves so soon after your divorce. I know that is not the advice you are seeking, but it may be worth your while to give it more consideration. Read up here (using the search function) about others that have delved into being landlords and learn the pitfalls. Most of all, don't be rushed into a "good deal". This is money that you need for the rest of your life and investing it properly will determine the quality of your retirement.

 

[donheff]

So how do you know this resort deal is so sure? I hope you are not relying on a pitch from some slick marketing outfit. In any event, please followup over the years.

 

[Bestwifeever]

Welcome to the boards! I anticipate you will get lots of good advice from people here (the above posts show that already). Take it all in, with or without a grain of salt as you like, but overall it can be really helpful--many here know of what they speak!

 

[Gumby]

Welcome aboard.

This link may help answer your Roth question.

Publication 590 (2009), Individual Retirement Arrangements (IRAs)

 

[growing_older]

You are looking at a 100% financing deal for rental property that "guarantees" you will cover your cost PLUS 13k per year profit Why would they sell any of those instead of keeping them all themselves? Since it's 100% financed, why don't they just buy 100 or 1000 or ? for themselves and make an unlimited profit... This deal doesn't smell right.

 

[mdebluz]

reply to everyone

thanks to everyone who welcomed me! I should clarify that I sure did sound stupid, maybe beyond stupid!! I have been working on the short sale deals for about a year. I have been separated for a year or so, so it wasn't a knee jerk reaction to freedom.... thanks for that concern and I agree totally with not making hasty decisions after a loss of any kind! After all I founded and run a Hospice... I know about loss and grief and such...

the property is in the Smoky Mountains. I have the past rental history for the 2 years since it was built. I realize that a lot of people think the bottom isn't here yet. This home sold for 335 K 3 years ago and is now 165 K on the short sale. A local bank where I live is the one offering to lend the 100% as I know them well. It is not a shady back door deal with some slick sales person in Orlando... sorry Orlando....

So, now see what you think of this idea....

I have the 400 K coming to my IRA

I leave 300 K in it to do whatever it is "they" do with it (don't worry, I will be paying attention and learning from all of you and others!)

I take 100 K of that and convert it to a Roth to avoid the 10 % penalty

Now is where I get confused...

The whole 72 (t) thing
The SEPP thing

Which one of these or can either of these be done from the Roth?

If so if I do the SEPP for the next 5 years I will have 20 K a year right?
I am 54....

thanks in advance!

 

[freebird5825]

Welcome to the forum.

 

[Lazarus]

thanks to everyone who welcomed me! I should clarify that I sure did sound stupid, maybe beyond stupid!! I have been working on the short sale deals for about a year. I have been separated for a year or so, so it wasn't a knee jerk reaction to freedom.... thanks for that concern and I agree totally with not making hasty decisions after a loss of any kind! After all I founded and run a Hospice... I know about loss and grief and such...

the property is in the Smoky Mountains. I have the past rental history for the 2 years since it was built. I realize that a lot of people think the bottom isn't here yet. This home sold for 335 K 3 years ago and is now 165 K on the short sale. A local bank where I live is the one offering to lend the 100% as I know them well. It is not a shady back door deal with some slick sales person in Orlando... sorry Orlando....

So, now see what you think of this idea....

I have the 400 K coming to my IRA

I leave 300 K in it to do whatever it is "they" do with it (don't worry, I will be paying attention and learning from all of you and others!)

I take 100 K of that and convert it to a Roth to avoid the 10 % penalty

Now is where I get confused...

The whole 72 (t) thing
The SEPP thing

Which one of these or can either of these be done from the Roth?

If so if I do the SEPP for the next 5 years I will have 20 K a year right?
I am 54....

thanks in advance!

Read here 72(t)/72(q)/SEPP Plans

If you begin a 72t you have to do it the longer of five years or until you are 591/2

The withdrawal is based on your life expectancy. You cannot get 20 K a year out of 100K in a 72t. Would be more like 5K a year. Which you would have to draw until 591/2. You could then adjust your rate up or down.

400K in a 72t withdrawal would get you about 20K a year.

There is a calculator on the website I listed. There are three accepted methods that you can use.

 

[jdw_fire]

welcome to the FIRE community!
i'm not real clear on why you need to pull anything out of the ira. you said you will get $13k/yr positive cash flow after all expenses and you said the mortgage will be for $165k. well your $13k cash flow should cover the mortgage payment, so why do you need any money from the ira?