Putting ER off 1 year

[F4mandolin]

My conscience got the better of me...and money of course. My Step-Daughter gets out of Uni in Sheffield in 2 more years so that is what I am shooting for now (as usual, only with VERA) at 54...Summer 2011. Whether it is the smartest thing to do with our money....I think we are going to throw a fair amount of money at our mortgage here in the UK. We are limited with the fixed contract to no more than 10% extra a year on a 210,000 Pound loan (198k now). We are going to toss in about 20,000Pounds before Christmas and another 20,000 after the new year to avoid the 10% penalty rule. I think we will have to hold on to the house until 2013 or so to get our money back on the house so we would have to rent it out for a couple of years after we are gone. It might not be the most cost effective way to put our money to work, but the rate on the mortgage is 4.49% and the savings accounts are heading down to 2% real quick. Our fixed rate runs out the end of Oct 09 and will revert to a variable I would think. I haven't put any money into a ROTH in a long time and I am wondering if it still that good of deal at this point. I am maxing out my TSP and will probably have another $10k sitting around looking for somewhere to go by March......any ideas on where to put that $10K over possibly just a couple of years?

[dex]

What will be you retirement currency needs - US OR UK?

[F4mandolin]

American citizen married to a UK wife. Moving back WA probably summer 2011. Since I work for the Govt I will always be paid in $. I will get a pension from work (about $16000 year) plus the SSecurity when appropriate. My wife has about 70,000 in Pounds that is only worth about $100k right now....but that savings account % has just dropped down from a good 4.5% or more down to 2%. We also have this house that is all tied up in Pounds as well. Good part is that the Govt is making the mortgage payments for me as long as I am working here. Once I quit and I want to hold on to it for a couple more years until the market comes back up a bit.....I would just rent to other Americans from the base. My wife's retirement with the UK is peanuts......we will be better off in the States as long as we don't do something bad like get real sick....then our US medical system will suck you dry.

[Koolau]

F4

Don't see where anyone has answered your question about Roth IRA. I'm a 'cheerleader' for them and wish I'd had more opportunity when I w*rked to take advantage. Now, I'm converting my IRAs/401(k) to Roths, trying to keep the tax hit manageable. But, when you can contribute from a stash of cash because you have earned income, that is the ideal. I don't know of a significant downside to the Roth unless you need a tax deferment. I've written elsewhere that the Roth is one of those ideas that slipped through and got too popular to delete from the tax code. Do your own homework, but the Roth is simply too good to be true - but it's true!

YMMV as always.

[harley]

I agree on the Roth. There's always a chance that they'll find ways to hit it later, but I think they'll have to grandfather existing assets. As long as you won't need the money until after you are 60ish I can find no down side to putting it in a Roth. I fully expect everybody to be in a higher tax bracket further on down the road, so to me a traditional IRA is a real risk. I'm converting as my finances and the laws allow.

[F4mandolin]

Thanks. I just had a call from a guy that will be handling my money since I am too lazy to really keep track of things. I am likely sending him enough to add to my Roth for this year and next. He also said I still might be able to retire next year instead of putting it off the extra year....we will see. I thought I would be dropping down to about 15% on the taxes at that time, but he thought it would be a good bit lower than that.

[Hobo]

I hate to be the bearer of bad news at Christmas, but you missed a lot of strategic moves that should have been made in the past. Is ER a new concept for you? How could you stay with a house with a convertible variable loan '09 when you still have a big mortgage? Even if economic times were good, how can you sell your house, move to WA, convert your retirement accounts, move your money to dollars and put them into a long-term annuity? That's too much financial activity in one year.

Also, being an absentee landlord is a terrible idea - especially for a nice house. One bad tenant will do more damage in a short time than you will ever receive in rents. My experience with property managers is terrible - they take the money and run. They have no incentive to give you good service.

The fact is, between the housing bubble and the falling pound, you have lost about 40% of your money. I don't have any good reason to believe things will rebound soon. I doubt if houses will ever recover - it was a bubble, not reality. You need to sit down with that money manager of yours and have a serious discussion and set up a reasonable retirement plan with reasonable assumptions.

BTW, don't quit your day job.

[F4mandolin]

Hobo, couple valid points you made.....ER reasonably new idea....partially. I figured I would be retiring here a couple years ago and likely working until about 2015-2017. We bought the house here under those assumptions. As far as the mortgage goes here.........as long as I am working....I am NOT paying the mortgage, the Govt is. Not out of my pocket at all. Still....if we had known we were going to call it quits as early as we likely are we wouldn't have bought the house and would have just rented (again, no cost to me). Some of our money is in Pounds (the house and my wife's accounts). As far as bubbles in the UK go....I have seen 2 major bubbles now since the late 80's, experience has told me it will do the same......but when? Do you have a lot of experience with the UK housing market? You are right about it not likely being real soon. We own a home in WA now....we didn't buy that as in investment.....we saw a place we wanted to live and didn't want to miss it. Under normal conditions, your worries about renting might be partially correct.....we do not have the temperament to rent out unless we needed to. BUT....I know the person who is keeping an eye on the house in the US, doesn't mean somebody won't trash the place...but if you knew what she has already done for us a million times over already.....We also bought a house we are going to tear apart a lot of the inside anyway....it was the only way my wife could buy and rent out without having a heart attack. The house here in the UK we would rent to the US military base (my employer) and they frown rather heavily on officers busting up houses that they have procured for them (at least overseas I have found that to be true).

Not too sure where you get the idea I would be moving money from here into an annuity.

Bottom line for us is this. Whether it is the summer of 2010 or 2011....we will have at least $450,000 (savings/stocks whatever) and up to $550,000 in various places (after fixing up the house). We will have a pension through the Govt paying over $16,000 a year. I am currently paying $104 dollars a month for health insurance which I carry into retirement. A social security supplement paying about $1000 a month from age 56-62. Then social security whenever I take it.....(and the kicker) my wife (a UK citizen) will be eligible for 50% of my social security. Now...the question is...will this allow us to live within a yearly spending limit of $40,000 (we are currently living on about half of that)? If for some reason some of the variables are off I would appreciate it if you point them out. I often ask my wife to do the same thing with my crazy ideas.....and she is usually good at it. As a school teacher, I find that putting things in a positive light to people gets much better results than telling them how horrible they are. My cup is half full............

Fred

[Hobo]

I retired to Indonesia and the primary source of news is BBC, so I am aware of the currency and real estate situation there.

You have a lot more money that I originally thought. If you have almost $1 million in other assets, then you should be fine. Find a some stable companies that pay good dividends and you should be have an annual income above $40,000 per year.

I kind of figured you had some arrangement with the US government base. Personally, I find absentee ownership is a pain. At some point you will have to fly over there to take care of some problem. Rental houses are not a passive investment under any circumstances.

You already have a house in WA. Is it paid for, or does it need extra repair to move in? If so, make sure you calculate that into your annual expenses. In fact you should plan on an extra $20-30K just to get moved and settled - more than that if you need cars too.

For me I can live on $40K per year, but I can be happy with the simple things in life. Give me a workshop, a computer, a supply of books, and a little room for my model trains - and I am happy.

Retirement is a good time to ask yourself what things you really want to do for the rest of your life. I know a lot of people from California who go to Oregon or Washington for a few years, and then come back home. But it sounds like you have figured out what will make you happy. Just make sure your money is settled and in the right pockets before you stop work. Surprises and retirement don't mix.

[F4mandolin]

Thanks Hobo for the info....we aren't quite as well off as you hint....although I often wonder just exactly you are supposed to count as your ''money'' in retirement. IFFF things go up a little in the next year or two then we would have the $450-$550k range after selling this house....savings etc, and yes, the house in WA (which is not included in the $450k estimate) was paid for in cash this last summer. It's a ranch style on 1.1acres, about 1800sf and about a 1000sf workshop(which I probably won't use much) with a great view of the Spokane river....all for $205k. I have a buddy who retired to Spokane 1.5 years ago and has a couple of rentals....I have NO urge to do that on any kind of basis even though he has tried to get me into buying a couple of things. I am from the West side of the state and went to school on the East side so I am familiar with the area. We are planning on spending about $70,000 on fixing the house and buying 1 car. I am definitely NOT a financial wiz which is why I have been getting on sites like this the last year. I know enough to be dangerous. For me as long as I can ride my bike (a recumbent), run, walk, play some music, garden and maybe golf...pretty well fills my day. We are just sitting back and waiting until next November to see how things are going. At that point if they are offering the early retirement we are going to have to make some tough decisions. After living in England for pushing 12 years (2 times here), 10 years in Germany and 5 years in Okinawa...England is more my home as anywhere since I haven't actually lived in the US for over 20 years.... I figure I can always fall back on Sub teaching for a couple of years if I need to pull in some money in those first few years.

[Hobo]

F4mandolin, I think some of us have a natural inclination towards looking after our investments. I am a Civil Engineer by profession, but I have been in and out of all sorts of investments during my life. So a lot of this handling money is second nature to me.

But, not all people are so inclined, and that is why retirement management companies exist in this world. To be honest, we are living in very uncertain times right now - and will be for the next year or longer.

You need more than a tip on a hot stock, or other investment advise from this forum. You need an accountant who will get your true net worth on paper - in a form that other investment professionals can read. Then, you need to do some serious shopping for a wealth management company. You need to make this a serious project, because it take some effort to find a good one - with references.

The best advise I can give you is your wealth portfolio is too complex for anyone to really give you a complete program here on this forum. You will sleep better at night if you have someone who can lay out a complete plan.

[Moemg]

Quote:

Originally Posted by F4mandolin Bottom line for us is this. Whether it is the summer of 2010 or 2011....we will have at least $450,000 (savings/stocks whatever) and up to $550,000 in various places (after fixing up the house). We will have a pension through the Govt paying over $16,000 a year. I am currently paying $104 dollars a month for health insurance which I carry into retirement. A social security supplement paying about $1000 a month from age 56-62. Then social security whenever I take it.....(and the kicker) my wife (a UK citizen) will be eligible for 50% of my social security. Now...the question is...will this allow us to live within a yearly spending limit of $40,000 (we are currently living on about half of that)? If for some reason some of the variables are off I would appreciate it if you point them out. I often ask my wife to do the same thing with my crazy ideas.....and she is usually good at it. As a school teacher, I find that putting things in a positive light to people gets much better results than telling them how horrible they are. My cup is half full............ Fred

Welcome , I am a little unclear about how much you have in your portfolio . If it's $450,000 & 550 ,000 . That should provide $40,000 a year and your pension & SS supplement should add another $28,000 . So with a paid off house you are okay but just to be sure try Firecalc .

[F4mandolin]

Thanks Moemg, unfortunately....the number ARE confusing and there is no way to make a decision for us until we actually have to next Fall. Because I work for the US Govt in the UK I am paid in dollars. But I am married to a lady from the UK. She has about 80,000 Pounds in savings etc(depending on what day it is...maybe $115,000). We also bought the house we are currently living in (in Pounds). Like Hobo had brought up....retirement THIS early isn't something we had originally planned which is why we bought this house. But, you can't go back and get a re-do so we will make the best decision we can when it is time to make it.....and a lot of that will depend on what the dollar/pound is doing. If the Pound gets stronger in a years time....I think that would be enough to call it quits....even if we take a loss on the house. If the rates stay like they are or get worse for us (stronger dollar)....then we either have to work another year or hold on to the house for another couple years. We will be coming back to visit her relatives every year anyway. This isn't the way most people on this site would like to go into retirement. I am just trying to figure out the best way to stick money into what places at the "last minute".