I’m Done!

[capngeo]

Hi Guys....... I am pulling the plug on a long career as a firefighter/paramedic. Andy & Janet, both suggested I pop in here (I Mod on one of the other Social Knowledge forums). I have a few ideas on what I want to do, none of which my accountant seems to like. I have my reading to do.
George

ETA... Dryer Sheets... Really?

 

[REWahoo]

Welcome George.

This may help answer at least one question for you: http://www.early-retirement.org/forums/f47/whats-the-deal-with-the-dryer-sheets-44456.html

Oh yeah - congrats on pulling the plug. Stick around a while and you may be able to pull the plug on your accountant, too.

 

[bbbamI]

Howdy George...welcome to the forum.

 

[capngeo]

OK so the dryer sheet thing is explained.... No biggie for me there, I hang my stuff on a clothesline... What’s a dryer?

Actually, I’m not very frugal, but then again I didn’t work my whole life to starve in retirement. Of course I’m not one to sit around under a palm tree with a fruity drink in my hand either.... that said “retirement” is a relative term for me, as I will still be doing things that turn a profit.

 

[W2R]

Welcome to the Early Retirement Forum, George.

One of the great things about being financially independent and retiring, is that we each get to figure out what retirement means for us. Some people volunteer, others take low key part time jobs, and for some of us every day is like the weekend. The nice part of it is that your time is now yours to spend as you like.

 

[Bestwifeever]

Wait, there are other forums?

Welcome to this one! When do you pull the plug?

 

[obgyn65]

Welcome, George.

 

[MichaelB]

Hi George. If you know what you want to do and your accountant doesn't agree, it's time for a new accountant. Better yet, get rid of them all together. You will get all advice you need here, and some it mighit even be worthwhile.

Welcome to the forum.

 

[Walt34]

Welcome to the ER forum!

Take a year or more off and figure out what you want to do next. Or if you want to do anything.

 

[grasshopper]

Welcome George, I retired 7 years ago and now at 60, I still qualify as a active red carded Wildland Firefighter.

 

[Midpack]

Welcome aboard George. W2R has summed it up nicely IMO, there is no bad or wrong choice.

One of the great things about being financially independent and retiring, is that we each get to figure out what retirement means for us. Some people volunteer, others take low key part time jobs, and for some of us every day is like the weekend. The nice part of it is that your time is now yours to spend as you like.

 

[FinanceDude]

Well, you certainly can't say your career was boring, right? I would take some time to relax and try out some hobbies or travel or just de-stress. You might like the phone not ringing all the time for 3 alarm fires or bad accidents on the expressway..........

 

[Janet H]

Of course I’m not one to sit around under a palm tree with a fruity drink in my hand either....

Hmm... do you need a retirement double to do this?? ooh, ooh, pick me

 

[Dreamer]

Welcome and congratulations!

 

[Nords]

I have a few ideas on what I want to do, none of which my accountant seems to like.

Accountant jealousy is such an ugly thing. What did they think you were eventually going to do if they kept following your advice?!?

Of course I’m not one to sit around under a palm tree with a fruity drink in my hand either.... that said “retirement” is a relative term for me, as I will still be doing things that turn a profit.

Hmm... do you need a retirement double to do this?? ooh, ooh, pick me

In your honors, I've just taken care of a couple of fruity drinks under our own palm trees!

 

[flyfishnevada]

Accountants are paid to say no. It's you're money, you spend it how you like (within reason of course). Congrats and welcome.

 

[Berkshire_Bull]

Do you mind sharing what in your numbers you and your accountant don't see eye to eye on?

 

[capngeo]

Well thanks for the warm welcome all.... And Janet... YOU know I have a nice sailboat to reach the island with the palm tree!

B_Bull... I am getting whacked with 43% in taxes and penalties for puling my money out of the Florida Retirement Service.. My bean-counter doesn’t think its wise. I have my doubts about the long term viability of the FRS fund, as the politicos have already floated the balloon about “borrowing” from the fund. My other option is to roll it to an IRA of one sort or another, which puts me at the mercy of the stock market (my current investments there aren’t exactly exciting me) AND I can get no return for the next 7 years until I’m 59.5

MY idea is to cash out, take the hit, and buy up rental properties... 2 or 3 family only... only properties that return the capital investment in 7 years or less. I know it sounds like fantasy, but I’ve had 3 units doing just that for the last 10 years. I enjoy the ability to do all the maintenance and repairs myself, and after 10 years, I have the management part figured out pretty well.

If I stay the course with the conventional FRS pension, the monthly stipend will be in the neighborhood of $4500/month before taxes. To get that all I have to do is wake up each morning. BUT the downside is the fund can go away, and I’m stuck with mortgages and car payments for life. (Other than a small balance on my current properties, I’m out of debt right now)

I figure I can come real close to the above monthly figure with about 5 days a month managing/maintaining the property(s) with almost no chance of losing the principle barring natural disaster or war. I would pay off my current properties and pay cash for the new ones. So yeah, I’d have to work a bit, but it’s something I enjoy doing, know well, and should pay about $1K/day for the effort.

 

[REWahoo]

.. I am getting whacked with 43% in taxes and penalties for puling my money out of the Florida Retirement Service.. My bean-counter doesn’t think its wise.

I'm beginning to see his side of the story. Ouch!

...AND I can get no return for the next 7 years until I’m 59.5

By 'return', do you mean you can't withdraw any funds without paying a penalty? Are you familiar with IRS Rule 72t for early withdrawals from an IRA?

 

[capngeo]

I looked at the 72t, and don't think it is for me. If I wanted a monthly stipend, I'd stay with the state. I've been watching real estate pretty close in the area since the crash. My thoughts a few years back were to keep working until it bottomed. I'm no expert, but this layman thinks it has. My "calculations" do not factor in any appreciation of the properties.... But if do actually buy in at the bottom, the figures can only go up.

Another factor is that we are facing an increase in hours worked for less pay, with a big hit in health insurance too. I'm either making the greatest mistake of my life, or will be called brilliant in a few years... I AM quite scared!

 

[W2R]

I looked at the 72t, and don't think it is for me. If I wanted a monthly stipend, I'd stay with the state. I've been watching real estate pretty close in the area since the crash. My thoughts a few years back were to keep working until it bottomed. I'm no expert, but this layman thinks it has. My "calculations" do not factor in any appreciation of the properties.... But if do actually buy in at the bottom, the figures can only go up.

Another factor is that we are facing an increase in hours worked for less pay, with a big hit in health insurance too. I'm either making the greatest mistake of my life, or will be called brilliant in a few years... I AM quite scared!

I can certainly understand why you are scared. REWahoo gave you some very, very good advice IMO. Is it worth risking your retirement to be called brilliant in a few years? Maybe, maybe not. It wouldn't be for me, but then different people think differently about what they want in life, and what kind of retirement they are looking for, if any.

 

[mh]

I can certainly understand why you are scared. REWahoo gave you some very, very good advice IMO. Is it worth risking your retirement to be called brilliant in a few years? Maybe, maybe not. It wouldn't be for me, but then different people think differently about what they want in life, and what kind of retirement they are looking for, if any.

I'm going to play devil's advocate here so don't take it the wrong way. It's in the spirit of hopefully helping you look at it from some other directions.

What do you have asset wise besides the pension? Taking a 43% hit right off the top on what i am assuming is a majority of your retirement assets seems pretty bold to me.

I'm not sure why you have to go all in on cashing out the pension. At a minimum why not roll it into an IRA and then "take the hit" on it in pieces as the properties convince themselves to you? It's easy to do and it gives you the option to leave some of it within the IRA if you happen to change your mind later.

There is also the issue of diversification & leaving yourself options. Do you really want everything riding on the health of the rental market in your targeted location? Maybe you do but you said you didn't feel expert on the issue. Some further reflection wouldn't hurt if that is true.

If your current rentals seem to be working, why do you want to pay them off? interest rates are *really* low right now so one can make a case it does not make very much sense to pay them off. Given that you are riding so much on those properties you may want to give yourself more justification for paying them off w/ penalized assets.

 

[WestLake]

I am about to turn 54 and I have 12 rentals all paid off except for small balances on two that I had on 30 year notes (11 years left). The rest were five and seven year notes.

I am maxing out on the 401K at work plus a Roth. I think I have been buying (stocks) low and I want to keep stashing for the next year or two before RE. I intend to get the smaller mortgage paid off through extra principal payments.

I also have about $300K in a taxable stock account.

I would not cash out to pay off the rentals. Besides the tax hit or penalty another reason is diversification, as mentioned.

I may dabble in Real Estate sales later (I have been licensed for 32 years). If I find a bargain I might buy another rental or two at that point.

 

[MichaelB]

I looked at the 72t, and don't think it is for me. If I wanted a monthly stipend, I'd stay with the state. I've been watching real estate pretty close in the area since the crash. My thoughts a few years back were to keep working until it bottomed. I'm no expert, but this layman thinks it has. My "calculations" do not factor in any appreciation of the properties.... But if do actually buy in at the bottom, the figures can only go up.

Another factor is that we are facing an increase in hours worked for less pay, with a big hit in health insurance too. I'm either making the greatest mistake of my life, or will be called brilliant in a few years... I AM quite scared!

In this case being scared is a good sign. I don't see why a rollover to an IRA is a problem. It does not mean stocks as you say, you can invest in fixed income and real estate as well. It also does not mean no returns for 7 years, but it does mean no withdrawals, even though you do have a 72t option. It sounds like you have made a decision and feel that this is a moment of opportunity you cannot miss. What is your "plan B" if this does not work out? It does not have to be all or nothing. You could rollover half to an IRA and keep it invested, and use the other half to finance your plan.

 

[capngeo]

Guys, I appreciate the advice and as strange as it sounds, I really want holes blown in what I’m contemplating. Naturally I'm plan on leaving the funds in the IRA until properties present themselves; sorry if I mislead otherwise. Similarly, the figures on my current properties’ return were excepting mortgage costs, which I actually DO currently have. That said, I can see why you are all recommending a more conservative approach; I’ll try to clarify my thoughts further below. I apologize for the lengthy post.

As to carrying mortgage balances.... last year (well on my 2010 tax return anyhow) I paid ~$21k in mortgage interest.... Paying that off alone will account for HALF of what I would get in a monthly stipend from the traditional pension. I also live in a cottage (as well as have a 1000sf workshop) on the back lot of one of the properties; my thought process on paying that off is that even if the rental market dried up completely, I would still have somewhere to live for only taxes and maintenance costs for the rest of my life. In addition, there is a duplex on the front of the property that currently generates $1200/mo income. Add that to the $1000/month in mortgage interest for that property, I’m looking at $2200 month in savings and income PLUS a free home and shop... in ONE property!

The 43% “hit” represents 33% income tax plus a 10% ER penalty (figures from my accountant). The funds in the account are 100% pre-tax; I contributed nothing to it with after tax dollars. So in my simplistic view 25-28% of the money would have gone to Uncle anyhow if it were a post-tax contribution. The 10% penalty amortized over the next 7.5 years (until I am 59.5) amounts ~$7K year.....OR about the rental income from ONE unit.

As a retiring firefighter with 25 years, I could collect the monthly stipend with no penalty at all right now, BUT aside from what I mentioned earlier about the doubts I have of the continued viability of the fund, were I to die prematurely the stipend ends and the principle is retained by the State.... NOTHING goes to my heirs! As bad as that sounds, I have no children and I could take care of my S/O with a life insurance policy, BUT the thought of the State keeping “my” money just irks me!

So, IF I left the money in an IRA and paid all the interest on my current properties, the interest alone would just about negate the 43%... AND I would be forced to postpone retirement for 7.5 years! Am I looking at this wrong?