Northwoods 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.