Northwoods Mary

[Northwoods Mary]

My husband and I are in the process of selling our home after which we plan to full time RV until we are tired of it (could be months or years). When we are tired of traveling, we can sell land we own to pay for a smaller hobby farm where we will raise most of our food as long as we are healthy.

We should net about $800,000 (non taxable) from our home sale and have about $900,000 (taxable) in IRAs with Fidelity. We are 56 now. My husband's's career was as a route salesman for a national food chain (selling to stores and driving truck) but after big company #1 sold to big company #2, pay and benefits are going in the wrong direction. I still have an active law license, but have not been practicing for a few years because of a diversion into politics (cured of that now!).

We are both capable of working part time, but prefer not to worry about a pay check while traveling. We can get expensive ($1,000\month) retiree health insurance through John's employer, but the Affordable Care Act may be a better option?

We would like a retirement income of around $90,000, but could get by with less, especially in the early stages while we are RVing. We will get around $3,000 combined (today's dollars) in SS once we hit 62, if we retire now.

Do we dare retire now or do we need to work a couple more years?

Any advice appreciated!

 

[Northwoods Mary]

Forgot to say we have no debt. And where did the "dryer sheets" tag come from? I'm obviously new at this!

 

[omni550]

Welcome aboard, Mary.

I'd suggest running your numbers through FIRECalc: A different kind of retirement calculator

If you have any questions, there are lots of helpful and knowledgeable posters here.

omni

 

[grasshopper]

Welcome Mary, would love to be in your shoes today. We retired 8 years ago age 54/51, but we went right to the ranch life, now we have so many critters it is hard to just take off and go. Getting help to keep things here rolling and the hikers at bay, heck ,it is just easier to stay home and do it all ourselves.

 

[omni550]

BTW, Mary, here's the answer to your question on dryer sheets...http://www.early-retirement.org/forums/f47/whats-the-deal-with-the-dryer-sheets-44456.html

omni

 

[wingfooted]

You have roughly $1.5MM in assets after the house sale, after buying the RV and after paying tax liabilities on your 401K accounts.

At 4% drawdown that is $60000 per year at best - 4% would be considered fairly aggressive considering an age 56 retirement.

Social security will kick in at age 62 - six years out.

No mention of how your assets are invested. Most of the retirement calculators assume 6% return per year and the only way you'll get that is with a healthy dose of equities, which is fine as long as you are prepared for the crazy, wild swings in your net worth.

All in all, it just looks too close to me. You'll need to either A) work a few years more, possibly with dual contributing incomes B) accept a lower standard of retirement income C) go into retirement with full knowledge that you are in a high risk zone.

 

[Northwoods Mary]

Wow, I'm amazed and grateful for responses already. I will check out FireCalc. I've used lots of online tools, but the results vary so much and don't allow for many variables.

I should say that our RV cost is already covered, so that won't be a deduction, although I realize that's not a huge difference. I'd also rather develop part time options and reduce our initial living expenses (rv forums generally say $50,000/yr is enough to live on while full timing; some do it for a lot less), than to stay wedded to our present circumstances for several more years.

Our risk tolerance is moderate: our IRAs are about 50% equities, 40% bonds, etc., 10% cash. We will be more conservative with a year or two at a time of our house proceeds.

On e we are in our 80s, if we make it that far, we would sell our hobby farm (probably for $400,000 in today's $) and move into a condo. Does any of that info change your advise, Wingfooted, or still not enough?

Thanks again!

 

[wingfooted]

. Does any of that info change your advise, Wingfooted, or still not enough?

!

What you'll see with both the calculators and FireCalc is working even one more year makes a tremendous amount of difference as a withdrawal debit is replaced with a positive savings / asset appreciation entry..

At some point it is likely that living in a RV will become stale and you'll need to invest back into a home, which will reduce your available liquid assets.

I would still say not enough, hang on for a while longer while you have a steady income source.

Your investment mix is conservative although you are taking a much higher risk on the 40% bond portion than what you think.

At the end of the day --- it is a personal decision.

 

[Northwoods Mary]

Thanks Wingfooted,

You advice may not be what I want to hear but is appreciated. As far as a hose, we will buy another one eventually, but will use our land sale proceeds - not a part of our retirement funds.

I'm curious about your bonds comment. I'm no expert, but have been trying to get smarter on investing with time presently on my hands. I've read that because interest rates are being kept artificially low right now and no doubt will rise, the typical wisdom of an inverse relationship between bond and equities performance likely will not apply. Is that what you meant? Any suggested alternatives, or is that beyond this thread?

Thanks again!

 

[retire2020]

Mary: RV Living Expenses : These guys are doing it with 1-1.3K/month....way less than 50K you mentioned.

Travel with Kevin and Ruth: Living Expenses

 

[wingfooted]

Thanks Wingfooted,

I'm curious about your bonds comment. I'm no expert, but have been trying to get smarter on investing with time presently on my hands. I've read that because interest rates are being kept artificially low right now and no doubt will rise, the typical wisdom of an inverse relationship between bond and equities performance likely will not apply. Is that what you meant? Any suggested alternatives, or is that beyond this thread?

Thanks again!

As you point out, interest rates are being kept artificially low by central bank money printing, aka qualitative easing. As soon as that stimulus is removed, it is likely that interest rates will return to historical norms or above. Your bond portfolio, particularly anything with a maturity out past five years, will then decrease rather markedly in value, maybe even 30 or 40 percent.

Equities will presumably be better able to withstand higher interest rates and inflation pressures as they are able to pass on their costs to the end user.


I have no magic bullet to offer. Personally I am 99% equities and 1% physical precious metals.

 

[daylatedollarshort]

40K year expenses X 30 years = $1.2M total retirement expenses

90K a year expenses X 30 years = $2.7M total retirement expenses

(90K a year expenses - 30K part time work for 2 people) = 60K a year net expenses X 30 = $1.8M total retirement expenses

You would have a much higher probability of success if you can cut your expenses, work part time or some combination of the two. 90K is almost double the average expenses for a household in your age bracket in the U.S., so maybe you could work on reducing that, especially during the time you are living in an RV.

The link below goes to a video of how an extreme saver lives in an RV on a fraction of 90K. He isn't traveling around so it isn't the same situation as yours, but he has tips on keeping his RV energy and water costs pretty low.
Living small: when home is a 150-square-foot RV - videos - *faircompanies

If you do a search for workamping jobs, there are job boards with temp and seasonal jobs for RVers.

 

[Northwoods Mary]

Wingfooted....I am going to share your comment with DH; it's the same as I've read elsewhere and it makes sense to me. Just wish there was something less risky than all equities that paid better than 2%.....me and everyone else! But I suppose the upside is that when the "easing" is over, CD rates, etc. will rise too. I remember the good old days when you could lock in 10% .... but inflation was high too. No easy way without a crystal ball!

 

[walkinwood]

Welcome to the board.

If you haven't already, I suggest you read some investment books like The Four Pillars of Investment by William Bernstein (my favorite by far) or books by Bogle or Swedroe. If you're going to manage your own portfolio (I do mine and don't think it is difficult) you need to feel very comfortable with what you're doing - and not stray from your plan.

You need to have a good handle on your expenses. Have you tracked your current expenses in detail? If you have, you should be able to estimate your expenses on the road. Look at eHealthInsurance.com to see what health insurance will cost today & speak to an agent (it will not affect your cost). Having a detailed understanding of your expenses is absolutely essential.

There are various methods to safely withdraw money from your portfolio. Plenty of threads on this topic.

I think only after you've looked at all the above can you make an educated decision on whether YOU can ER or not.

It may seem daunting at first, but tackle it one at a time & you'll get through it with no trouble. This board is incredibly encouraging and helped me a lot when I was first starting to figure it all out..

All the best.

 

[heeyy_joe]

Welcome to the forum to you and your husband. First, I am surprised to know a man that drives a route truck for a living wants to drive even more in an RV. (Not that there's anything wrong with that). So let's say y'all retire and do the RV thingie and then find you don't have the money for the hobby farm, but you do have the money for a condo. How disappointed would you be? Does this help with your decision tree?

 

[Jack_Pine]

I am with what most are saying here. I do agree that you can live pretty cheaply full timing in an RV. (If you choose) We were considering that as an option for sometime.

While you are receiving all of this advice....what kind of RV? are you going to pull a toad?

 

[Northwoods Mary]

Thanks to all for the great advice. Looks like I have some reading and more investigating to do.

DH actually likes driving, as long as he can do it at his pace in a comfortable vehicle. Otherwise, he says, it is too much like work.

When we start, we will use the truck and RV we already own (F250 diesel and LQ trailer - we have a couple horses). We want to attend some rallies to learn more before we buy something else, it think we will want a 5th wheel, but not so big that we can't get into some wilderness areas when we choose.

We are pretty invested in a hobby farm eventually, but we want to travel first before deciding on a location....and who knows? Life changes. As I said, I'm not really worried about our ability to earn some income if necessary or if we need something to do once we're done moving around. We don't want to be dumb about this and end up old and poor, it we also don't want to continue 60+ hour work weeks until we're too old to enjoy traveling, etc. because we were too worried about security. We're looking for a reasonable balance, I guess, and feeling fortunate to have a choice. Of course, in our rural neck of the woods, it could take a couple years to sell our house and then our dilemma would solve itself.

 

[Original Wally]

At some point it is likely that living in a RV will become stale

For what it's worth, the average for full timers is betwen 3 and 5 years. Then the need to settle down kicks in.

 

[pb4uski]

You have roughly $1.5MM in assets after the house sale, after buying the RV and after paying tax liabilities on your 401K accounts.....

I'm not sure anyone here would voluntarily convert the 401k to taxable funds and pay the taxes all at once, if that is what wingfooted is suggesting. The typical play is to either rollover the 401k to a tIRA or just keep the 401k, neither of which results in taxable income (if done correctly).

In most cases your tax rate just after ER will be very low (mine went from 25% to 0%) so you may have closer to the $1.7 million. You can get a good idea by taking a copy of last year's tax return and taking out your earnings and making other adjustments for changes in retirement. Many of us ER plan to do 401k/tIRA to Roth conversions up to the top of the 10 or 15% bracket (pre Obamacare anyway).

Quicken's Lifetime Planner (part of Quicken Deluxe and higher) is an intuitive, easy to use planner that may fit well with your needs.

I think you should be fine but I don't see $90k of spending being prudent based on what you have unless you each are near the max on SS.

 

[obgyn65]

Welcome to the forum, Mary.

 

[seraphim]

I had questions about the purchase of the hobby farm as well: will you pay cash, take out a mortgage, and how much do you plan to spend on the farm? Farm aside, I'd look at it this way (and I will note I've o ly been in the market for about a year, though I've recently ER'd. I hope others more experienced will point out any flaws in my thinking).

4% draw down on $1.7M is $68k. This assumes you are not buying the RV from those funds. If you could live on that amount for six years umtil SS kicked in. You'd also qualify for Obamacare subsides (under $72k, I believe).

Or


First six years drawing $90k from the taxable account: ignoring returns for the sake of budgeting leaves you about $240k in your taxable account. Hopefully, with returns, that figure will be low. Best IMO to budget one the low side, since we have no crystal ball.

Taxes on capital gains: no tax expert, but taxes ought to be low, strictly on capital gains. Would that $90k pretax annual draw also cover payments on the hobby farm, since we didn't pay cash for it from the initial $1.7M? Assuming you don't fall in love with full time RVing.

At 62, when SS kicks in - $36k - your draw from the taxable account will be $54k a year. For about five years, I assume, before you have to start drawing on the tax deferred accounts. Your taxes will be less, as I believe SS distributions are not taxed federally. I don't participate in SS, so I could be wrong.

It's 11 years into retirement and your tax deferred account is untouched. Using the rule of 72, your investment there MAY have doubled. If so, you would be drawing the equivalent of $54k from a $1.4M tax deferred portfolio. Means higher taxes. Again, using a 4% WD, the tax deferred account - by historical strategy - has a good chance of covering that draw for 25 years.

This line of thought makes several assumptions: any mortgage payments on the hobby farm could be made from that $90k draw, and you experience no major setbacks such as long term medical care or another market catastrophe such as 2008. It also assume your house would sell, and you would get the price you expected.

Could it work? I'd say possibly, again we are ignorant about what your exact expenses are each year. I don't know what you could cut out of your expenses or how low you could actually go. But I think this plan would leave no safety margin for emergencies, and I think 4% draw down is high in this economic environment. 3% might be more prudent. DW and I are using 2%.

As for cheap RV living, there is a vandweller site at Cheaprvliving.com. The author has lived for decades at a base $15k annual expenses. He boondocks a
lot in the desert, however, and workcamps for free sites and electric during the tourist season. Most RVers I'm acquainted with, who pay for camping sites, assume about $60k a year for full time expenses. For the RV side, try RV.

Both sites have a lot of good RVing info.

Again, remember my relative inexperience with investing in the market. My wealth was accrued in stable protected accounts.

Hope this helps.

 

[Northwoods Mary]

Thanks again for lots to think about. To clarify our thinking a bit: during our first years of ER, at least until 591/2 but maybe longer depending on which draw down method is best from a tax standpoint, we will use house sale proceeds (est, $800,000) to live. Except for gains on this money, it is not taxable. Once we start using IRA $, it will be taxable. That's actually about $950,000 (but could be due for a correction, so I think of $900,000 for planning purposes.). So once we have the option of using IRA money without penalty, we will have to decide which pots are best to draw from as we go.

We plan to spend less during the initial part of RVing - probably $50,000 or as little as we can to still allow some fun and travel. Boon docking is fine, but not foregoing the gas for a trip to Alaska, etc.

When we are tired of full time travel, we will sell land we own ( not figured into the $ we are using to live) and use the land sale $ to purchase/build the hobby farm. To make the dollars equivalent, we may have to do some of the construction work ourselves, but we would enjoy that. We may also have to use the land as our residence while we travel, because right now we have no basis in it - it was a gift years ago when it had not much value.

Once we are settled on our farm, we anticipate we will need more money to pay for extra things we want to do. We will be pretty self-sufficient though (producing most of our food &, energy, no payments), so we anticipate using most of our money for travel and family, although we will need to buy some used equipment. There's quite a bit of flexibility under those circumstances. After another 10 -15 years (depending on health), we'll scale back to something small and easy to maintain. At that point I see us needing less $ again.

So that's our tentative plan but no crystal ball. If it's even 75% likely to succeed, I'm fine with that. We can work part time or otherwise adjust if our investments go South.