42 and considering all of my options

[coldnose]

Good Evening (or Good Morning depending on where you are in the world). I found this site about two weeks ago and have since discovered that there are lots of like-minded people out there in cyberspace. While my plans are not set in stone just yet, I could potentially retire full time next year.

I am 42 years old, single with no kids, no debt and am happiest when I am either traveling or planning my next trip. I spent 21 years in the Army and retired in 2012. Presently, I’m finishing a Master’s degree in Accounting and will have it all complete by May of next year.

For assets, I have a house in North Carolina that I’d like to sell next year after graduation and put the money to work more safely in a collection of bond mutual funds. While I make about $600/month from renting the house after expenses and management fees, I’d really rather get out of the absentee landlord business. My Roth is sitting at about $18,000 right now (I started late and gave myself a good swift kick in the butt for that). Additionally I’ve got various other investments in a target retirement fund and a REIT fund through Vanguard as well as individual stocks, all totaling about $59,000. My income consists of my Army retirement pension of $1,900/month and my rental income.

My quandary is that I’m not really sure what I want to do with my degree, but I know what I don’t want to do with it, and that is spend several soul-crushing years working 80+ hours per week doing audits for one of the big 4 Accounting firms. Ideally, I’d like to telework exclusively, but would consider working in state or local government or non-profit accounting for a few years.

What I’d really like to do (and this may sound nutty, but it appeals to me) is spend the rest of my days as a global nomad, spending 2-3 months somewhere and then moving on. I love traveling, and could see myself happily moving from the Philippines, to Malaysia, to Turkey, Ecuador, back to the states for the holidays with family and then start all over again. I’d be interested in conversing with anyone here who lives in a similar fashion. When I was stationed in Germany I lived outside base on the local economy, and adapted fairly well to the eccentricities of living in a different culture. I don’t really need ‘stuff’ outside of a nice laptop computer and some comfortable clothes, so living out of a suitcase isn’t that big a deal.

So, retirement is still kind of up in the air, as you can tell. My expenses are currently higher than I’d like, due to living in a high COL town, but they would drop substantially if I was no longer renting an apartment and sold my car. The job situation will play a big role in the final decision, as will the selling the house piece.

[haha]

Quote:

Originally Posted by coldnose Good Evening (or Good Morning depending on where you are in the world). I found this site about two weeks ago and have since discovered that there are lots of like-minded people out there in cyberspace. While my plans are not set in stone just yet, I could potentially retire full time next year. I am 42 years old, single with no kids, no debt and am happiest when I am either traveling or planning my next trip. I spent 21 years in the Army and retired in 2012. Presently, I’m finishing a Master’s degree in Accounting and will have it all complete by May of next year. For assets, I have a house in North Carolina that I’d like to sell next year after graduation and put the money to work more safely in a collection of bond mutual funds. While I make about $600/month from renting the house after expenses and management fees, I’d really rather get out of the absentee landlord business. My Roth is sitting at about $18,000 right now (I started late and gave myself a good swift kick in the butt for that). Additionally I’ve got various other investments in a target retirement fund and a REIT fund through Vanguard as well as individual stocks, all totaling about $59,000. My income consists of my Army retirement pension of $1,900/month and my rental income. My quandary is that I’m not really sure what I want to do with my degree, but I know what I don’t want to do with it, and that is spend several soul-crushing years working 80+ hours per week doing audits for one of the big 4 Accounting firms. Ideally, I’d like to telework exclusively, but would consider working in state or local government or non-profit accounting for a few years. What I’d really like to do (and this may sound nutty, but it appeals to me) is spend the rest of my days as a global nomad, spending 2-3 months somewhere and then moving on. I love traveling, and could see myself happily moving from the Philippines, to Malaysia, to Turkey, Ecuador, back to the states for the holidays with family and then start all over again. I’d be interested in conversing with anyone here who lives in a similar fashion. When I was stationed in Germany I lived outside base on the local economy, and adapted fairly well to the eccentricities of living in a different culture. I don’t really need ‘stuff’ outside of a nice laptop computer and some comfortable clothes, so living out of a suitcase isn’t that big a deal. So, retirement is still kind of up in the air, as you can tell. My expenses are currently higher than I’d like, due to living in a high COL town, but they would drop substantially if I was no longer renting an apartment and sold my car. The job situation will play a big role in the final decision, as will the selling the house piece.

We have members about your age, with more money but likely no more income than you have who live similarly to how you want to live. You have a gold plated pension and health care, and if you are accounting correctly for your real estate asset I would seriously consider keeping it. Is it in University town? Are all your other assets in retirement funds? If so, you might want to do temp accounting or something for a while just to get a better cash cushion.

The other thing in favor of doing what you want is that a 40 year old expat is in a different boat than a 50 year old, and given your pension, house asset, and marketable degree you have some time to see for yourself. Of course it is easier to get a good jump out of the gate right on graduation, but you don't want to do that.

Ha

[inky]

Welcome! I'm also 42 and planning on leaving my job next year. I love to travel and plan to be on the road about 50% of the time, but will come back to my home in between to rest up, visit family, and take classes. I may do some freelance software development after I leave my full-time job, which would lend itself to working while I'm overseas.

You may have already discovered their blog, but Billy and Akaisha Kaderli (who are members on this site) are perpetual travelers of the sort you are referring to:

Retire Early Lifestyle

[coldnose]

Quote:

Originally Posted by haha We have members about your age, with more money but likely no more income than you have who live similarly to how you want to live. You have a gold plated pension and health care, and if you are accounting correctly for your real estate asset I would seriously consider keeping it. Is it in University town? Are all your other assets in retirement funds? If so, you might want to do temp accounting or something for a while just to get a better cash cushion. The other thing in favor of doing what you want is that a 40 year old expat is in a different boat than a 50 year old, and given your pension, house asset, and marketable degree you have some time to see for yourself. Of course it is easier to get a good jump out of the gate right on graduation, but you don't want to do that. Ha

Thanks for the response. The house is in a military town. I was unable to sell it in 2009 when I moved to Germany, and it sat vacant for over a year before I accepted reality and put it up for rental. Once I did that, it rented almost immediately. When there are no maintenance issues, the cash flow is nice. A major expense, however, would possible derail any overseas travel plans. I do maintain a cash buffer for major repairs, but if multiple things go wrong at once, or if my management company somehow let it be rented by meth cookers, I'd be in a world of hurt. I'd personally be a little more comfortable with a little lower but more steady monthly income from bond funds which could then be easily sold if I wanted to buy a house again. It will be interesting to watch what happens with the interest rates this upcoming year.

My retirement funds are about 1/3 in a Roth which I'm maxing out each year, and the rest in brokerage accounts. I plan to continue contributing to the Roth until I'm about 65 before starting to draw down any retirement accounts.

[pb4uski]

Quote:

Originally Posted by coldnose ....I am 42 years old, single with no kids, no debt and am happiest when I am either traveling or planning my next trip. I spent 21 years in the Army and retired in 2012. Presently, I’m finishing a Master’s degree in Accounting and will have it all complete by May of next year. ...... My quandary is that I’m not really sure what I want to do with my degree, but I know what I don’t want to do with it, and that is spend several soul-crushing years working 80+ hours per week doing audits for one of the big 4 Accounting firms. Ideally, I’d like to telework exclusively, but would consider working in state or local government or non-profit accounting for a few years. What I’d really like to do (and this may sound nutty, but it appeals to me) is spend the rest of my days as a global nomad, spending 2-3 months somewhere and then moving on. I love traveling, and could see myself happily moving from the Philippines, to Malaysia, to Turkey, Ecuador, back to the states for the holidays with family and then start all over again. I’d be interested in conversing with anyone here who lives in a similar fashion. When I was stationed in Germany I lived outside base on the local economy, and adapted fairly well to the eccentricities of living in a different culture. I don’t really need ‘stuff’ outside of a nice laptop computer and some comfortable clothes, so living out of a suitcase isn’t that big a deal. ....

While you probably know this, the reality of a career change is that you'll need to spend some time "proving" yourself even with your military experience and a master's degree. It is just the reality whether you go public or private. However, you should be able to be on a faster track with your maturity and experience.

Do you plan to get certified? Certification can open the door to many jobs.

One possibility that might suit your interest in travel is internal audit with a multinational megacorp, but most look for at least a CPA to start. My first move from public was to internal audit which included a lot of travel (about 80%). It was great at first but got old fairly quickly.

There are plenty of companies looking for skilled people who are willing to travel/live in those parts of the world.

[coldnose]

Quote:

Originally Posted by pb4uski While you probably know this, the reality of a career change is that you'll need to spend some time "proving" yourself even with your military experience and a master's degree. It is just the reality whether you go public or private. However, you should be able to be on a faster track with your maturity and experience. Do you plan to get certified? Certification can open the door to many jobs. One possibility that might suit your interest in travel is internal audit with a multinational megacorp, but most look for at least a CPA to start. My first move from public was to internal audit which included a lot of travel (about 80%). It was great at first but got old fairly quickly. There are plenty of companies looking for skilled people who are willing to travel/live in those parts of the world.

Thanks for the feedback. I am taking the CPA exam this summer and fall, and if the stars align correctly, I'll be licensed before the end of June next year, which incidentally is the same time the rules change in Colorado.

I'm steering my coursework towards a specialization in Forensic Accounting, so working for a small forensics firm is certainly an option, as is working in government accounting. Ideally, I'd like to eventually (sooner rather than later) be able to put the degree and experience to work completely or overwhelming majority of the time from home.

Are you an accountant? If so, would you be willing to answer a few career specific questions by PM?

[heeyy_joe]

Forensic accounting and travel could go well together.

[38Chevy454]

A gov't job you can leverage veteran's preference. I think you will need to save more to meet retirement goal. Your pensiona nd the rental income are nice, but not enough present nest egg to make up the difference you need; unless you live real cheap.

So finish the degree, get any certifications that can help you, and then max out saving until the nest egg can provide the added money with your pensiona nd other sources of income.

[FIGuy]

Quote:

Originally Posted by coldnose Thanks for the response. The house is in a military town. I was unable to sell it in 2009 when I moved to Germany, and it sat vacant for over a year before I accepted reality and put it up for rental. Once I did that, it rented almost immediately. When there are no maintenance issues, the cash flow is nice. A major expense, however, would possible derail any overseas travel plans. I do maintain a cash buffer for major repairs, but if multiple things go wrong at once, or if my management company somehow let it be rented by meth cookers, I'd be in a world of hurt. I'd personally be a little more comfortable with a little lower but more steady monthly income from bond funds which could then be easily sold if I wanted to buy a house again. It will be interesting to watch what happens with the interest rates this upcoming year.

Please accept some advice from a fellow landlord. I would sell this house if you're not getting at least 2% of the current value in monthly rent. It isn't the substantial portion of your passive income and you can replicate much of the income from that big bond fund you mention. We've got quite a few rental units and it's tough to make money with a mortgage on an expensive (relative to rent income) house. It sounds like the uncertainty of this house is holding you back anyway.

Absolutely you should be a global nomad. The wife and I plan to do the same and if I was single with a big pension, you better believe I'd be out there right now. You have a perfect degree for working a few months a year as a tax CPA to fund much of this life. Live on half your total income and you'll still end up wealthy. The problem will be what to do when you meet that gorgeous French model or Thai knockout... Enjoy this lucky life you have.

[nash031]

Quote:

Originally Posted by FIGuy Please accept some advice from a fellow landlord. I would sell this house if you're not getting at least 2% of the current value in monthly rent. It isn't the substantial portion of your passive income and you can replicate much of the income from that big bond fund you mention. We've got quite a few rental units and it's tough to make money with a mortgage on an expensive (relative to rent income) house. It sounds like the uncertainty of this house is holding you back anyway.

Just curious as DW and I are exploring the possibility of renting out our current home and downsizing in a better location: on what rationale do you base the 2% of value suggestion? For us, that would be impossible regarding what rent we'd have to charge, however we could easily get 1.5-2x our mortgage/HOA/escrow payment in rent on our home. We have more than 50% equity in the house as well, so we may look at renting for a while to enjoy a different location then move back once the house is paid for to further reduce our expenses.

Sorry to hijack, this question just kind of struck me.

[someguy]

I don't want to answer for him, but I imagine it's the standard 50% rule again. Basically half the rent you charge will go toward operating expenses (repairs, vacancy, taxes, insurance). The remaining half is your profit starting point. If your rent fee to investment (either a mortgage or cash in your rental property) ratio isn't high enough either your mortgage or your cash opportunity cost will exceed the remaining half.

Quote:

Originally Posted by nash031 Just curious as DW and I are exploring the possibility of renting out our current home and downsizing in a better location: on what rationale do you base the 2% of value suggestion? For us, that would be impossible regarding what rent we'd have to charge, however we could easily get 1.5-2x our mortgage/HOA/escrow payment in rent on our home. We have more than 50% equity in the house as well, so we may look at renting for a while to enjoy a different location then move back once the house is paid for to further reduce our expenses. Sorry to hijack, this question just kind of struck me.

[FIGuy]

Quote:

Originally Posted by someguy I don't want to answer for him, but I imagine it's the standard 50% rule again. Basically half the rent you charge will go toward operating expenses (repairs, vacancy, taxes, insurance). The remaining half is your profit starting point. If your rent fee to investment (either a mortgage or cash in your rental property) ratio isn't high enough either your mortgage or your cash opportunity cost will exceed the remaining half.

Yup. 50% rule and 2% rule combine to give a theoretical cap rate of 12%, which is a reasonable amount IMO to justify a single rental property based on the anxiety the original poster suggested over the rental biz. Cap rate = 2% of value / month * 12 months / yr * 50% net / total= 12% of purchase price in this case. My opinion on rental properties is it's not worth doing if one is planning to stay small (like one house). It can be a bit of a PITA sometimes even with professional management. When the total NOI covers a big part or even all of your cost of living, it could be worth the hassle.

2% is a tough nut to crack in most markets in the USA right now and folks make money with less all the time. I just wanted to offer a simple suggestion to the OP on how to decide.

[someguy]

I agree 100% with FIGuy on all points. If I were to go back into SFM rentals, I would be looking for a cap rate of 12% unless I were planning to go all in to real estate and build a large portfolio of managed properties. IOW, to me it's just not worth a $200-$400/mo net income to tie up the cash/credit and bear the risk that rentals can have. I think it's a little like the mortgage pay off debate -- there is a strong psychological aspect to it that can sway the is-it-worth-it question considerably outside what the math dictates. And for reference, I intentionally hold a mortgage and invest the difference and that doesn't bother me at all. However, when I had rentals it felt like a constant hovering shadow.

[haha]

I agree with this conservatism.

I think though, that the only money that has been made in Seattle as well as many other cities single family rental business over the last decades has been de facto speculative. Often the entire rent doesn't even cover mortgage, taxes, and insurance. Buyers somehow think the rest will take care of itself, and they will reap huge gains on sale. Which at times they do.

This sometimes is a hard hurdle. I passed on bungalows in the 70s in Venice Beach, then selling around $20,000, and if they haven't been cleared are selling ~$1mm now. These are the kinds of things that one's wife may like to bring up at just the wrong time.

Ha

[coldnose]

Quote:

Originally Posted by FIGuy Please accept some advice from a fellow landlord. I would sell this house if you're not getting at least 2% of the current value in monthly rent. It isn't the substantial portion of your passive income and you can replicate much of the income from that big bond fund you mention. We've got quite a few rental units and it's tough to make money with a mortgage on an expensive (relative to rent income) house. It sounds like the uncertainty of this house is holding you back anyway.

Your advice is pretty much spot on. On good months I'm netting just under 1% of the value, and having no mortgage helps greatly. Property taxes are somewhat high for the value of the house, and I have no intention of moving back there. Putting that money into a collection of bond funds might not give me quite as much money each month, but the fund shares would be highly liquid (unlike a piece of real estate) and my tax rate is low so the income isn't going to put me into a higher tax bracket. Additionally, I would no longer be on the hook if/when something expensive eventually happens.