Need Retirement Investment advice

[modhatter]

Well, my two cents.* First of all, if* he waits on Social Security, he will most likely have to wait until he is almost 66 (nearly four years)

That is a wise course to take if he can in that time frame generate an income of $28,000 a yeqr, with the rest (approx. $8,000 coming from distributions from say a Wellington fund)* Of course when social security kicks in, he will then be in pretty good shape.

If you read the posters numbers, you see that maybe he has at best $200,000 equity in the house, not $400,000 and less than that when you take out selling costs and a declining market.

I believe the market will get worse in the ensuing years, so if there is any hope of selling, I think now is better than later, unless it is much later (5 to 10 yrs.)

I don't know what state the poster lives in.* Hopefully it is not California.* If it is a more reasonable state (real estate wise)* I would strongly recommend downsizing to a condo if a house is out of the question.* They owe a $30,000 line of credit on the mortgage as well as a $200,000 mortgage.* Then add in at least $15,000 in selling costs for commission and closing costs.* Poster is now left with $155,000.

Depending on where you are from, you may be able to buy a two bedroom (sometimes 3) two bath condo for that.* Now you have no mortgage, and much lower taxes, no outside upkeep, and generally a much more stress free life style.* (Peace of mind)* So instead of requireing $3,000 a month to sustain yourself, you now could probobly get by on $2,000 a month.

Also, with bringing $250,000 to the table at Vanguard, they will assign you a personal advisor who will help contruct your portfolio for your needs.* So due to the fact that you are lacking in knowledge at the momment, this will be most helpful.

Also, a note about downsizing.* It is surprising how well one can adapt to a much smaller place, and like it.* Most other countries around the world live in much smaller homes or apartments than we do, and do it very well.* As long as you don't have a bunch* of screaming kids running around, you would be surprised how happy you could be in a 900 to 1,100 sq. ft condo. (Much easier to clean too)

But all that being said.* Waiting another 4 years and meanwhile having to generate an additional $28,000 a year is a tall order.* However, downsizing now and having to produce $16,000 a year may be very duable for you.

[Khan]

Quote:

Well, my two cents. First of all, if he waits on Social Security, he will most likely have to wait until he is almost 66 (nearly four years)

He can take Social Security at 62 or 63 or 64 ... 70 ... 75 ... not at all.
Of course there are issues of penalties/taxes to be considered for each age.

[FIRE'd@51]

Actually, it seems to me that this is an ideal situation in which to take SS at 62. It appears the SS benefits will not be taxed, and the $1450 per month makes it easier to get to the 3000 per month income OP needs in the near term by by withdrawing $1550 per month from the retirement accounts (401K and/or IRA). This way OP can wait until a less stressful time to sell the house and move, and who knows, by then even the housing market may be better.

[modhatter]

That's a 7.50% withdrawel from his portfolio. Better he take 4% ($833 a mo. )and supplement the balance ($716 mo.) with some side work. Give his portfolio a chance of growing for future inflation instead of depleting it.

[johnbb]

I've said it before, but I'll say it again: You guys are great. Not only am I getting excellent advice, I feel like you have genuine concern for my situation. I especially appreciate the sentiments from crazy connie and jazz4cash. Here's where I am at... I am NOT going to do the annuity. I really feel that I need to stay in my home a while longer. If it were just me, I would put it on the market tomorrow. But, my 38 year old daughter who lives with me has terminal cancer, and has been given 6-18 months. I just can't make a change at this time. Hopefully I'll never have to make that change. I am putting together an aggressive plan for part-time work, with a networking component, Internet Job Search, placement agencies, personal Web site with resume and portfolio, and email to key people in local compaines.

I don't know I can wait for SS. I have enough in savings to get through the end of the year. I will roll my $255K 401K over to either Vanguard or Fidelity, and if I can get consistent part-time work, I can decide if I want to take SS, or supplement my income with IRA distributions. Which would be better? Or as someone suggested, maybe a mixture of all three, since the work component may not be consistent? So, given these circumstances, here's what I see as my choices for now:

1. Part-time work supplimented with SS
2. Part-time work supplimented with IRA distributions
3. Part-time work suppliments with SS/IRA
4. No significant work - SS and IRA distributions

The part-time work is a big factor, but I don't know if I will find enough, and how much it will contribute to my income.

for Modhatter: I do live in CA (Bay area). I'm not sure I understand your comment:

"If you read the posters numbers, you see that maybe he has at best $200,000 equity in the house, not $400,000 and less than that when you take out selling costs and a declining market."

My house appraised at $650K when I refinanced. I owe $200K, plus the $30K equity loan. I stated I had about $400K in equity taking into consideration the equity loan and selling costs. I recognize the value will potentially go down, but I would think I would have $400K at this time. Am I missing something or just dreaming?

[FIRE'd@51]

johnbb,

I think #3 is your best option if you can get part-time work (especially if you can work out of your house). Also, in mid-October, the COLA for 2007 will be announced, which will probably add another $50-60 a month to your SS. Also, with respect to the part-time work, just remember, you can't earn over $12,480 (this number is also adjusted for inflation) without losing some of your SS benefits ($1040 per month in your first non-full year of drawing benefits). This page explains it:

http://www.ssa.gov/pubs/10069.html

Quote:

Originally Posted by modhatter That's a 7.50% withdrawel from his portfolio. Better he take 4% ($833 a mo. )and supplement the balance ($716 mo.) with some side work. Give his portfolio a chance of growing for future inflation instead of depleting it.

Actually, it's closer to 7%, (1550 x 12) / (255,000 +10,000) = 0.07. In any case, this would be a temporary withdrawal rate until the house is sold, at which point the portfolio will receive a chunk of money equal to the equity in the house when sold less the cost of the new home. However, I agree that it would be better to suppliment the SS with part-time work, if possible, up to the $12,480 limit.

[Meadbh]

Quote:

Originally Posted by johnbb I feel like you have genuine concern for my situation. ........my 38 year old daughter who lives with me has terminal cancer, and has been given 6-18 months.

Yes, we are concerned for you and your daughter. She is lucky to have such a devoted Dad!

In Canada the Federal Government recently established a Compassionate Care program to support people in your situation. In fact I have used it myself.

http://www.hrsdc.gc.ca/asp/gateway.a...e.shtml&hs=tyt .

Does California, or the US, have anything like this?

[astromeria]

With a prognosis of terminal cancer, hospice can be a great help in providing nursing care and pain relief, as well as aides to help with dressing, bathing, and so forth--and emotional comfort for patient and family members. I believe their services are either free or paid by one's health insurance--my mother had no bills from hospice through my father's terminal cancer.

Remember to get out of the house often for some California sunshine to renew the spirit. And keep up your social contacts, the ones that cheer you up or are good listeners anyway. Best wishes for strength and comfort to you and your daughter.

[MooreBonds]

Quote:

Originally Posted by johnbb 1. Part-time work supplimented with SS 2. Part-time work supplimented with IRA distributions 3. Part-time work suppliments with SS/IRA 4. No significant work - SS and IRA distributions

John,

What IS the difference in your SS income between taking it now versus waiting 1...2...3....4 years? Either go to the SS website and plug in the numbers, or read off of your statement. That will help give perhaps the last bit of concrete info to help solidify any discussions.

[Delawaredave]

Quote:

Originally Posted by johnbb I feel like you have genuine concern for my situation. I especially appreciate the sentiments from crazy connie and jazz4cash.

Just wanted to say best of luck with your situation.* I don't have any good additional advice other than already posted, either financial or otherwise.

This is a reminder to me that our most precious "asset" is time and health - and that this "asset" has a volatility that I often underestimate and take for granted - can't do this.

[Mr._johngalt]

Quote:

Originally Posted by Delawaredave This is a reminder to me that our most precious "asset" is time and health - and that this "asset" has a volatility that I often underestimate and take for granted - can't do this.

"Time and health"........mostly why I left the workplace so early. Worried about
having enough time and inevitable health decline. 13 years have passed
and the health issues are many. I should have ERed even sooner.
All hindsight now.

JG

[JohnEyles]

Quote:

Originally Posted by Peter76 What IS the difference in your SS income between taking it now versus waiting 1...2...3....4 years? Either go to the SS website and plug in the numbers, or read off of your statement.*

Also, I don't know if anyone has recommended the most excellent calculator
at this website, called FIRECalc.* You want the 'Advanced FIRECalc'* and on the
'How much will you spend ?' tab you can readily change the year SS begins
and the amount.* Then, on the 'Results' tab, you can either tell it to say
'how much you start with' based on what you said your spending needs
were, or 'how much you spend' based on the nest-egg you entered on
the 'How much do you have ?' tab.* Either way, just try the various
SS possiblities and see what optimizes the results (for how MUCH you
can spend, or how LITTLE you can start with).

Be forewarned that FIRECalc is considered to be a very pessimistic
calculator, so do not be too discouraged by the results, and consider
settling for a 'failure rate' well under the default 95%.

[FinanceDude]

Quote:

Originally Posted by brewer12345 john, if you don't want to move right now, don't move.* You need to come up with roughly $18k a year, so find it.* You could tap the 401k to a certain extent, but I would be cautious of withdrawing it too far because that is about your only major liquid asset.* If you are open to moving eventually, you just need to figure out how to bridge the gap between now and when you sell.* I can think of three sources of liquidity that could tide you over for at least a few years until you sell the house: - 401k withdrawals - part time job - incremental borrowings on a HELOC Obviously, a combination of some or all of these might be a reasonable choice, too. Don't buy the annuity.* Without making things too complicated, the annuity your bank recommended would be extremely expensive.* Most of us agree that a reasonable amount to draw out of a balanced (stocks and bonds in various combinations) portfolio is 4% a year, bumped up each year for inflation.* The annuity your bank suggested likely has expenses of at least 3% a year.* That means that just the annuity expenses would consume roughly 75% of what you could be safely drawing from your portfolio! What is the 401k invested in now?* You may wish to consider rolling it over to a low cost IRA at Vanguard.

Good sound advice. I too am worried about having liquidity in your situation. Looks like you might take your age 62 option on SS. So you will get $17400 a year in SS payments. If you take 4% withdrawal on $255,000, that gives you $10,200 more. That's $27.600 a year, still a bit short.

If you are willing to work, you could find a part-time job that pays $10-12K a year, yielding what you need for income on an after-tax basis. Is the $3k a month expenses pretty rock bottom, or is there some wiggle room?

Sell the house as a last resort. You may have some unforseen expenses that you could use the equity to cover if necessary.

Good luck..............

[New Thinking]

You could delay your SS to age 70 and that should yield you close to $39,000 starting at age 70 (using current SS COLA assumptions). Thats coming a little low on your future expenses of $3k per month when you project inflation - but it is close. You then could tap your 401k first over the next few years and bridge to the higher SS. You would owe some tax because these are qualified assets, but that could be offset by your mortgage interest deduction + home equity line of credit deduction. Your income after age 70 would likely be tax-free because you have so much SS and so little IRA withdrawals. You most likely could then tap into the assets created by your home sale without paying much in taxes.

This way, you take the guesswork out of whether you will ever have enough (if that is important to you).