Camas Lilly
Recycles dryer sheets
- Joined
- Sep 18, 2007
- Messages
- 318
Here is the scenario:
Target Budget: ~$80,000
DH retired, turns 70 this August
I would like to retire next year. I will be 63.
2021 projected retirement income/budget
Taxable SS (DH) $20,574
Pension (DH) $31,000
Divs-misc (2019) $3,000
RMD-DH (2022-23) $ 12,000
AGI $66,574
Std. Ded. -$26,100
= Taxable Income $40,474
CG/Fed Tax cap -$80,000
Wiggle Room $39,526
Addl Income needed
To meet budget $13,426 ($66,574 + $13,526 - $80,000)
I have several options in front of me and could use some input on what the best thing to do is.
1) I start early withdrawal SS at age 63 in 2021 @ $17,160 (this was my original plan until I started checking on the house below) Full retirement age is 66.8, I am 62, so roughly 6.5 years to go. SS will be $24,145 at that time. Age 72 (new RMD age) = 2030, or 10 years.
I inherited a house in 2010, split 2 ways, in an LLC, valued today at $387,500. Market value TOD $50,000, remodeling costs $50,000 = $287,500 Tax basis. Potential monthly rental income = $1,800 - $2,200 ; Taxes are $3600/yr
I am 1600 miles away and currently the house is managed by my sister. My nephew lives in it, who sporadically pays rent to sister, who covers all the related bills. So this currently produces no income for anyone. If anything, sister is covering expenses. It was my understanding he was renting for a “reduced rate” and my sister was being reimbursed for remodeling expenses she paid out of pocket until I just followed up on the progress. Nephew has been in house for 5 years so there is lost rental income for a period of time. Nephew is now unemployed due to Covid 19, but I don’t want to kick him out. I have no expenses for this house and I am not entirely sure I should be asking for rental income, since it is in the family and I also know there is value in someone staying there 24/7. Tensions seem elevated and conversation limited. (Mother did make me pay rent when I stayed there…LOL). This presents some other options to withdrawing SS early.
2) Work something out with sister and nephew to pay half rent, let’s say $900/month x 12 = $10,800 – expenses $5,000 = $5,800 / 2 = $2,900/year or $242/month. I stay in, the house appreciates and I proceed to draw SS early.
3) Remove nephew and rent full value, let’s say $1800/month x 12 = $21,600/year - $5,000 expenses $16,600 / 2 = $8,308/year or $692/month. Most undesirable - this could be ugly.
4) Could it be in my best interest to ask for a buyout now, and forfeit any increase in value? If so, is there a way to minimize capital gains? At $187,500 I am pretty sure will cost me 35%.
5) I am wondering if they were to take a loan out to repay me over the course of, say 10 years, would be the smartest move. Using a mortgage calculator, $187,500 @ 0% interest over 10 years would be $1563/month, $18,756/year. This would allow me to meet budget, keeps me below the tax threshold with some room left over and allows me to delay SS withdrawals. I lose 10 years of appreciation of the home, I don’t have to deal with family differences of opinion but am concerned this may put them in a bind.
6) Drop it and walk away. My sister and her children really don’t have anything to do with me, so nothing would change either way.
Our current taxable income with no draws and my working salary for 2019 was $69,792 = $10,208 wiggle room for an $80,000 tax threshold, so until I retire, I don’t have much wiggle room. My target retirement date is June 2021, so I could them 6-12 months to work this out.
We are intending on selling our primary residence and purchase another to complete our move out of state in 2021-2022. We are beginning that process now with the purchase of property, clearing, pole barn, etc. so we will have some costs to deal with until then.
I haven’t figured any inflation and all of these figures are a rough estimate.
Thanks for reading.
Target Budget: ~$80,000
DH retired, turns 70 this August
I would like to retire next year. I will be 63.
2021 projected retirement income/budget
Taxable SS (DH) $20,574
Pension (DH) $31,000
Divs-misc (2019) $3,000
RMD-DH (2022-23) $ 12,000
AGI $66,574
Std. Ded. -$26,100
= Taxable Income $40,474
CG/Fed Tax cap -$80,000
Wiggle Room $39,526
Addl Income needed
To meet budget $13,426 ($66,574 + $13,526 - $80,000)
I have several options in front of me and could use some input on what the best thing to do is.
1) I start early withdrawal SS at age 63 in 2021 @ $17,160 (this was my original plan until I started checking on the house below) Full retirement age is 66.8, I am 62, so roughly 6.5 years to go. SS will be $24,145 at that time. Age 72 (new RMD age) = 2030, or 10 years.
I inherited a house in 2010, split 2 ways, in an LLC, valued today at $387,500. Market value TOD $50,000, remodeling costs $50,000 = $287,500 Tax basis. Potential monthly rental income = $1,800 - $2,200 ; Taxes are $3600/yr
I am 1600 miles away and currently the house is managed by my sister. My nephew lives in it, who sporadically pays rent to sister, who covers all the related bills. So this currently produces no income for anyone. If anything, sister is covering expenses. It was my understanding he was renting for a “reduced rate” and my sister was being reimbursed for remodeling expenses she paid out of pocket until I just followed up on the progress. Nephew has been in house for 5 years so there is lost rental income for a period of time. Nephew is now unemployed due to Covid 19, but I don’t want to kick him out. I have no expenses for this house and I am not entirely sure I should be asking for rental income, since it is in the family and I also know there is value in someone staying there 24/7. Tensions seem elevated and conversation limited. (Mother did make me pay rent when I stayed there…LOL). This presents some other options to withdrawing SS early.
2) Work something out with sister and nephew to pay half rent, let’s say $900/month x 12 = $10,800 – expenses $5,000 = $5,800 / 2 = $2,900/year or $242/month. I stay in, the house appreciates and I proceed to draw SS early.
3) Remove nephew and rent full value, let’s say $1800/month x 12 = $21,600/year - $5,000 expenses $16,600 / 2 = $8,308/year or $692/month. Most undesirable - this could be ugly.
4) Could it be in my best interest to ask for a buyout now, and forfeit any increase in value? If so, is there a way to minimize capital gains? At $187,500 I am pretty sure will cost me 35%.
5) I am wondering if they were to take a loan out to repay me over the course of, say 10 years, would be the smartest move. Using a mortgage calculator, $187,500 @ 0% interest over 10 years would be $1563/month, $18,756/year. This would allow me to meet budget, keeps me below the tax threshold with some room left over and allows me to delay SS withdrawals. I lose 10 years of appreciation of the home, I don’t have to deal with family differences of opinion but am concerned this may put them in a bind.
6) Drop it and walk away. My sister and her children really don’t have anything to do with me, so nothing would change either way.
Our current taxable income with no draws and my working salary for 2019 was $69,792 = $10,208 wiggle room for an $80,000 tax threshold, so until I retire, I don’t have much wiggle room. My target retirement date is June 2021, so I could them 6-12 months to work this out.
We are intending on selling our primary residence and purchase another to complete our move out of state in 2021-2022. We are beginning that process now with the purchase of property, clearing, pole barn, etc. so we will have some costs to deal with until then.
I haven’t figured any inflation and all of these figures are a rough estimate.
Thanks for reading.