52 Year old Self employed from Missouri seeks ideas for retirement

[Rickt]

We are 52 years old and self employed with two children. One is a Junior in Engineering school and the younger one is a Junior in HS.
Education Fund: We have enough saved for the older child to graduate without any debt and saved enough in 529 plan for the younger one's two years of college. We are contributing towards the 529 plan @ $1300/M and think that after two more years of contributing to 529 we should have enough balance to finance the younger one's college.
Mortgage: We paid off the mortgage ($1500/m) last month and now plan to add that money to our stock/mutual fund portfolio of $100k in an effort to grow our nest egg.
IRA ACCT: Current balance of $250k in stocks/mutual funds (50/50). We contibute maximum allowable to IRAS each year. WE don't have any other retirement fund
NET value of the business: $500K+
Annual Income: $80-$100K
We would like to retire in 2018 after the younger child finishes college. In the meantime we would like to aggresively grow our retirement next egg.
Any guidance/advice would be appreciated. Thanks

 

[Gumby]

Welcome, Rick. The first thing you need to know is how much you will spend in retirement. This is best done by tracking your current spending and making reasonable adjustments that will occur upon retirement (i.e. -- less gas for commuting, more money for health care, etc.). Once you know your spending, use FIRECalc: A different kind of retirement calculator to see where you stand.

 

[bbbamI]

Welcome to the forum. Congrats on being mortgage free and funding your children's college accounts.

As far as aggressively growing your retirement accounts, I can't help much in that situation... However, many members on this forum go through Fidelity and Vanguard and look for low ER funds.

Another suggestion would be to keep a detailed spreadsheet of your yearly expenses. Understanding essential and discretionary expenses is very beneficial in retirement as there may be years you need to cut back because of market fluctuations.

If you haven't already, you might want to plug your numbers into FIRECalc (at the bottom of the page).

 

[Rickt]

Firecalc

Thanks Gumby and bbbamI for your response and recommendations. I will check out Firecalc. Hope to make a positive contibution to this forum.

 

[bbbamI]

You're welcome....

Oh..and I forgot to add in my first post that it's nice to see someone here from MO. Missouri is my home state....haven't lived there in over 18 years...I sure miss it sometimes.

 

[Gumby]

I left MO 35 years ago to "join the Navy and see the world". The rest of my family still lives there.

 

[Rickt]

I left MO 35 years ago to "join the Navy and see the world". The rest of my family still lives there.

Gumby: You are welcome to visit us in the mid missouri area anytime! Would love to host you/your family during your visit here.

 

[eridanus]

Mortgage: We paid off the mortgage ($1500/m) last month and now plan to add that money to our stock/mutual fund portfolio of $100k in an effort to grow our nest egg.

Put it on auto-draft now to your brokerage account. It's easy for spending to grow since, hey, the house is paid off!

 

[PaddyMac]

We're both self-employed and almost same age. You mention an IRA - is that a SEP-IRA? What is your marginal tax rate?

If you want to save more tax deferred, you might look into an Individual 401k (for husband & wife) from Vanguard, as you can save a lot more with that free account. We have both SEP-IRA and 401k and now that we're over 50 we can save 20% of net profit + $17,500 + $5,500 catchup with the 401k. You can also have a Roth-IRA for each of you.

 

[Rickt]

Retirement savings

Paddy:

CurrentlyI have $ in Roth IRA but thanks for the suggestions of looking into SEP-IRA and individual 401K. I have looked into these and the easiest way to set up a retirement account for us, as per my accountant, is in Simple -IRA.
I do have employees and must offer them the option of saving for retirement and must match their contribution upto 1-3% from the company funds if they choose to invest in the Simple IRA account for themselves. We can include qualifications viz: offer it only to F/T employees only to those who have worked with the company for atleast 24 months etc.
Simple IRA has the least amount of administration on our part and can be set up with any major brokerage company viz. Fidelity Investments, Charles Schwab etc. The contribution limits are similar to SEP IRA and individual 401K plan and each individual manages their own Simple IRA account that is set up at the brokerage firm. The deadline to set up the Simple IRA account is before October 1st for the current year. I am seriously considering opening the account before that. Thanks for

 

[G-95]

Hi Rick,
I believe that the key for comfortable retirement is positive cash flow every month.
Start with Determining how much money you will need every month when you retire.
Acquiring assets class that has value and provides positive cash flow to you. For example, multi family units, self storage, land, businesses, etc. The goal is to have these assets managed by trusted managers or employees and professional property managers, and you still get positive cash flow after paying all those expenses every month. I think that's the way to retired comfortably without worrying about losing all hard earned monies because all those assets you owned will still have value in the long run.

 

[pb4uski]

Rickt,

You mention a business being a substantial part of your assets. What is your exit plan? Is it the type of business that would be easy to sell? The only reason I ask is that I know some entrepreneurs who have successful businesses but the path to exit isn't clear. Something to consider and plan for.

On the saving/investing many of us favor low-cost, index funds from Vanguard, Fidelity, Schwab, etc.

 

[Rickt]

Positive cash Flow

Hi Rick,
I believe that the key for comfortable retirement is positive cash flow every month.
Start with Determining how much money you will need every month when you retire.
Acquiring assets class that has value and provides positive cash flow to you. For example, multi family units, self storage, land, businesses, etc. The goal is to have these assets managed by trusted managers or employees and professional property managers, and you still get positive cash flow after paying all those expenses every month. I think that's the way to retired comfortably without worrying about losing all hard earned monies because all those assets you owned will still have value in the long run.

G-95: Thanks for the advice! Inadvertently I ended up being a hotel owner and have been blessed to have well located cash flowing hotel that I manage myself and another one that is managed by a trusted manager. Am currently building a portfolio of dividend paying stocks to provide steady income in retirement (in 5 years). Will review the situation in 3 years and decide if I must sell one or both properties at that time.

 

[Rickt]

EXIT Startegy

Rickt,

You mention a business being a substantial part of your assets. What is your exit plan? Is it the type of business that would be easy to sell? The only reason I ask is that I know some entrepreneurs who have successful businesses but the path to exit isn't clear. Something to consider and plan for.

On the saving/investing many of us favor low-cost, index funds from Vanguard, Fidelity, Schwab, etc.

Pb4uski: Thanks for the suggestion of creating an Exit Plan!
I am a hotelier and NO, it is not easy to sell a hotel like it is to sell a house (not very easy right now).
Am currently building a portfolio of dividend paying stocks to provide steady income in retirement (in 5 years). Will review the situation in 3 years and decide if I must sell one or both properties at that time. It will probably take 1-2 years to sell the properties.

 

[G-95]

G-95: Thanks for the advice! Inadvertently I ended up being a hotel owner and have been blessed to have well located cash flowing hotel that I manage myself and another one that is managed by a trusted manager. Am currently building a portfolio of dividend paying stocks to provide steady income in retirement (in 5 years). Will review the situation in 3 years and decide if I must sell one or both properties at that time.

Rickt: that's awesome! Congrats on that, I'm really glad you decided to become a hotel owner. That is a great move. Hopefully your kids or family would love to take over the management and keep the hotel. There's nothing more powerful than cash flow every month. All the best to you!