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Retirement on Labor Day 2018?
Old 09-04-2017, 05:01 PM   #1
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Retirement on Labor Day 2018?


I have learned a lot from lurking on this forum, and would like to introduce myself and run a retirement scenario through the hive mind. I am 60 and still working, and DH is 65 and has just retired. On this Labor Day I am asking myself whether a year from now I too will be able to retire. If not on Labor Day, maybe by the end of 2018?

We currently own 4 investment properties, one of which is in the city to which we expect to retire and it will become our home in retirement. Total market value of the 4 properties is currently about $1.4M, against which we owe $360K. In addition, our current residence is worth about $450k and we owe $190K on it. Two of the investment properties have no mortgage. Next year, we plan to sell one of the properties without a mortgage. The proceeds will pay off the two remaining investment mortgages. In 2019, we will sell a second property as well as our current home, leaving us with one rental and our future home in the new city, and no mortgages. (we have been renting out our future home since we bought it last year). When the three properties are sold and all mortgages are paid off, we will have just under $1M in investments (when added to current brokerage and IRA accounts), and the one remaining rental. This total is net of LTCG taxes and selling costs. The plan for the investment accounts (tIRA, Roths, taxable) is a 40/60 split between bond index and equity index funds.

As far as expected income, we will have ~$5,100/month from my pension, DH's social security and the rental. If I take SS at 63, that monthly total will increase to $6,500. My best estimate of expenses, including big ticket purchases, all taxes, and healthcare, which I will get through my state retirement until Medicare, will be $7,600/month all in, so we will need our investments to cover a $2500/month gap for two years until I take social security at 63, and about $1100/month thereafter. Once I'm on Medicare in 4.5 years healthcare costs will decrease somewhat. Delaying SS is an option, it would just require more from our own resources in the near term.

My questions for the hive are: 1) What is the advisability of selling two investment properties and our home in two consecutive years; and 2) what have I failed to consider in this plan?

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Old 09-04-2017, 08:53 PM   #2
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I'm no expert but you will have capital gains on those properties. I hope the experts tune in to help you.

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Old 09-04-2017, 09:07 PM   #3
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Yes, thanks, street, based on recent sales of other properties in their respective areas, I think we will have about $50K total in LTCG tax on the two condos. Our personal residence will fall well below the $500K limit for capital gains, so it will only be the two condos that we will pay taxes on. I guess that goes to Question 1 about the advisability of selling them in consecutive years.
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Old 09-07-2017, 01:17 PM   #4
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Is there a better way to get additional responses on the E-R forum? I feel like I missed something . . .
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Old 09-07-2017, 01:28 PM   #5
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Originally Posted by PartIrish View Post
Is there a better way to get additional responses on the E-R forum? I feel like I missed something . . .
Well, after all, you are part Irish.

Just kidding. Welcome to the forum. I think folks are a bit precooupied with hurricanes and such. Have you run your numbers through FIRECalc? We find that to be a useful tool that helps the discussion. You can find a link at the bottom of the page.

Also take a look at this post for some useful questions.
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Old 09-07-2017, 02:03 PM   #6
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[QUOTE=MichaelB;1934113]Well, after all, you are part Irish.

Yes, true that, although only the best parts.

Thank you for the 'ready to retire' questions; it is a comprehensive list to consider, and I appreciate how much the answers circle back to controlling expenses. The income figure in my initial post includes a good bit of buffer, including $12K/year in expenses for 'everything else.' Right now we carry significant and varied expenses for the properties we own, even the ones without a mortgage. Once we whittle that down to one residence and one rental the expense side of the ledger decreases considerably.

Yes, firecalc and I are old friends, and every configuration I've tried has come out with positive numbers at the end of 25-30 year periods. Notwithstanding my heritage, I'd like to eliminate luck as a necessary variable in the sustainable retirement equation.

Still pondering the timing on sale of properties.
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Old 09-07-2017, 04:22 PM   #7
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Is the pension COLA adjusted? Have you included healthcare, taxes, etc in your budget. (Firecalc is gross spending so you need to have enough spending to cover taxes, medical, etc.)

I am not an expert on selling off rentals so I'm no help there.
Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 7%, rental income 18%
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Old 09-07-2017, 09:08 PM   #8
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The pension is not COLA-adjusted, so frozen at $21K/year; however I will also get social security bc I live in a state where state employees pay into both systems. Prospective budget includes $12K/year for healthcare (DH on Medicare and my healthcare is through state retirement system so marginally subsidized). The $7600/month includes taxes and assumes no debt, which will be the case by late 2018 or early 2019.

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