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Old 07-11-2017, 12:17 PM   #1
Confused about dryer sheets
Join Date: Jul 2017
Location: Tucson
Posts: 2
New member introduction

Hi, my name is Tom and my wife's name is Denise. I'm 56 and she is 57. I currently work for a defense contractor as an Engineer with a salary of $104k. My wife owns and runs a short term vacation rental that nets another $10k per year. We have no children.

Right now I have a 401k with my employer worth about $114k. I current contribute 9% of my pay (including employer match). We have a house here in Arizona worth about $600k with a mortgage of $432k owed on it. We own a rental house outright in Colorado worth about $90k, but the tenant moved out last month and we need to renovate it if we want to turn it into a vacation rental (produces more income than long term rentals). The vacation rental we do currently produce income with is worth about $139k with a $92k mortgage. We have no car payments. All are owned outright. We do have about $25k in credit debt total.

I have read how well so many members have done saving and I feel really bad that I did not save more by this age.

Over the last few months, my company has made me feel that I am growing too old for this business. I now find myself looking for ways to retire early. I guess age 62 if I can last that long, but I'd love to leave earlier. I find myself looking at places like Nicaragua, Ecuador, Columbia, and Mexico to retire to. The cost of living looks low. Yes, there is abject poverty there as well. Medicare will not work there. Private health insurance can be found and it's still less than some of the health plans my current employer offers me.

But to just liquidate and pack up everything is intimidating. I am doing my best to learn Spanish, so at least one of us could communicate. We are in good health (knock on wood), so medical does not worry me so much yet, and we can always return to the US for Medicare services. Many of these countries has pension programs that allow for lower taxes than I would pay in the states in retirement.

We are adventuresome and have traveled extensively, but getting the wife to leave the world of mega stores and paved roads is not an easy sell.

Is this a viable idea or is it just a pipe dream? Your input is appreciated. Thanks for reading.

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Old 07-11-2017, 12:48 PM   #2
Recycles dryer sheets
Join Date: Apr 2014
Posts: 233
There are lots of risks with a plan like this. The dollar is near an all time high. It won't always be this way. Also the countries you mention will experience higher inflation which will eat away at your purchasing power. Seems like a 50/50 chance things will work out there and if they don't you certainly can't afford to live in the US.

Take Mexico for instance. I think the peso is floating around 18-20 per dollar. The average is 12. When it returns to the average your dollar is worth 30% less. It looks like you spend most of the money that you make. If you can't trim your budget by 30% now I doubt you can do it in Mexico in the wake of a currency shift.

This is a realistic/pessimistic outlook. I'm not saying you can't do it but you will need to make some drastic changes. On your budget you will need to learn to live like the locals. People smarter than me will chime in.

Best of luck

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Old 07-11-2017, 01:40 PM   #3
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Join Date: Mar 2017
Location: New York City
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welcome, at least you have a plan. I think most people dont. We have a few expats in this forum that live very very well in foreign countries. I recall one member saying he spends about 50k a year and has a wife and 2 young children, He even posted pictures of his house/apt, fabulous. If your going to run out the door soon, I dont know about putting money into a rental/ vacation unit, start dumping them now. Run the firecalc a million ways. With social security, without, with reduced. See what is says about how much you can spend based on your numbers. Do some searches in the top search bar about old threads from expats, these guys are living large. Good luck
Withdrawal Rate currently zero, Pension 137 % of our spending, Wasted 5 years of my prime working extra for a safe withdrawal rate. I can live like a King for a year, or a Prince for the rest of my life. I will stay on topic, I will stay on topic, I will stay on topic
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Old 07-11-2017, 06:27 PM   #4
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I don't know any way to sugar coat this. You are living way beyond your means. In your shoes, I would conclude I need to change my spending and saving habits immediately. At your income, you should be maxing out your 401k, which means $24,000 plus the employer contribution. You are eligible to contribute to two Roth IRAS at $6,500 each. I would not convert any more properties to vacation rentals. I would sell the vacant property and either pay off the mortgage on the first rental or invest the proceeds. You are going to need that. Another option would to be to move into the free and clear property.

I would take a hard look at your residence. My conclusion would likely be I could not afford it, and I would sell and downsize or rent. Taking advantage of a much improved real estate market could be the smart thing to do.

It would be a good idea for you to calculate how much Social Security you will collect at different ages. If your wife put enough time in the system, she may be eligible to collect on her own account or it may be better to collect on your record. Either way, you have several years to cover before you are eligible.

If you lose your job, how long can you collect unemployment? Will you be eligible for any medical coverage if you retire? Would it extend to your wife? What about Cobra?You have a number of years to cover before Medicare kicks in.

The credit card debt needs to be addressed as well. It's another symptom of living beyond your means.

The most important thing is to start fixing things today. Begin collecting all the information you need and from there you can construct a reasonable plan.
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Old 07-11-2017, 07:40 PM   #5
Confused about dryer sheets
Join Date: Jul 2017
Location: Tucson
Posts: 2
I don't disagree totally with your assessment. What has been left out of this story is that in 2010, both my wife and I were laid off from our jobs. I was out of work for a year. She never regained employment. We had to file chapter 7 bankruptcy. All of the 401k, the equity in the current house, the free and clear rental, and the other rental were all built up in the last seven years. In 2010 my 401k was $0. The only thing I had then which I still have are two paid off vehicles from 2008.

I agree about selling off the Colorado home and paying off the vacation rental. It would leave more money per month for investing. But first I would retire the credit cards. They were used for a new roof, new windows, and new siding on the Colorado home because my insurance carrier decided that they would non-renew my policy without it.

As for our main home, it was bought because it also has a separate 1100 sq ft guest house next to it where my wife took care of her elderly aunt until she passed. We plan to sell the house and guest house later and downsize, but I have good equity in it that continues to grow. And with the guest house, it's another source of rental income that can produce pretty quickly.

With the credit cards paid off, the vacation rental mortgage mostly retired, and the guest house producing, that should allow me to funnel more money into the IRAs and 401k mentioned. Assuming the stock market does not tank again.

As for my job, I don't feel that endangered, but agism is real. Anyone over 50 can attest to that. I work hard and have kept up with technology. And it's hard to recruit people to Tucson - that's why I relocated here from Denver. If necessary, I can also go on the road and do contract work (I did it in the past for years).

Thank you for your advice. I'll take a good look at the situation. If anything it's very motivating.
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Old 07-11-2017, 07:50 PM   #6
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Originally Posted by tada View Post
Assuming the stock market does not tank again.
A very bad assumption, because it absolutely will. We just don't know when, how much and for how long...
Numbers is hard

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Retired in 2005 at age 58, no pension
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Old 07-12-2017, 03:22 AM   #7
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If you want to retire, find a way to do it. It does not have to be black or white-working today, not working tomorrow.

Looks like you have about $400k in savings/real estate equity. That is enough for some options.

Some thoughts. What COULD you do, that you would enjoy, and still make money (just not 100K). Think of a PT job maybe, and perhaps your wife could up her earnings some. What if you sold your current home and moved into your Colorado rental? What if you moved into your guest home and rented out the big house where you currently lived? What if you sold everything and moved to any of a dozen cities in the Midwest or South where you can still buy a decent home for $150k-to 200k, and pay cash (from your current equity)? Look into subsidized Obamacare to get you through to Medicare age (yeah, yeah, it is going to change....maybe.)

Doesn't have to be forever. Find a way to survive to 62, then draw two checks and build from there. If you are really miserable and scared, think outside the box. You are already doing that thinking about foreign living. Consider staying in the US instead.

Just because you don't have a couple of million in retirement savings does not mean you can't do anything. In the lower cost of living USA areas, a paid off house, $250k in savings, 2 SS checks and a couple of PT jobs can be a dooable retirement on a shoestring package. Good luck.
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Old 07-12-2017, 04:48 AM   #8
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I didn't see enough spending info to provide a useful reply. Have you input your numbers in FIRECalc: A different kind of retirement calculator ? That should give you some idea what your historical probability of success might be.

And I'd recommend a harder look at health care wherever you settle in. Many people are "knock on wood" healthy until they're not, and medical expenses can easily derail a plan - at an age when going back to work if difficult if not impossible.

No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 40% equity funds / 35% bond funds / 25% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
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