59 Year Old Who Could Go Tomorrow Except For One Thing

[almost_there]

Hi All - Have been reading some good stuff on this forum and I am learning a lot. My situation is that I am 59 and have a good news/bad news situation. I live in what most people would consider a good size house on about 10 acres. If I were to sell out and down size I could probably retire tomorrow. The thing is that I really like where I live. My health is good and I like being outside working around my house and property (yes even in the summer in SW FL). My wife no longer works and I am fortunate enough that I get to work out of my home as a tele-commuter. As a result I have older cars with no payments. My only debt is my mortgage which is $300k. The house is worth about $850k. My stash between pre-tax retirement savings and others is $700k (about 600k is pre-tax). The kids are grown and on their own. My annual expenses with the mortgage payment would normally be about $60k. It has actually been about $84k because I have been throwing lots of extra money at the mortgage (after contributing the max towards the 401k). I am fortunate enough that I get a $30k (gross) per year pension that I have been collecting for the last 12 years. Without the mortgage we could easily live (even in this house) on about $30k net. Some day SS would make this even more tenable.

My plan is to pay off the mortgage. My combination salary and pension makes it possible to aggressively pay extra principal each month so it will take me about 3.5 more years to pay it off. My main concern is that I will be involuntarily retired. While I have a good job it is tied to the healthcare industry which as we all know is in quite a tizzy these days. If something happens to my job my ability to rapidly pay of my mortgage disappears and the house basically then becomes a big drag on my ability to retire.

Any thoughts or comments are most welcome.

 

[EastWest Gal]

Despite the tizzy in healthcare, it is unlikely jobs will go away soon. Looking at the unemployment rates in healthcare, the entire industry is very stable. There are shortages in many areas, including my own (primary care physician), as well as many support staff jobs. The tizzy around the ACA is largely centered around Republican/Democrat, conservative/liberal talking points. In reality, other than some people's upset solely due to their political leanings, I see a stabilizing effect from the ACA. In the past 5 years I have personally seen a massive reduction in uninsured patients as well as a massive reduction of obviously illegal immigrants from Mexico. The talk on the political talk shows is just that--talk. That's how those folks get paid.

Is there anything happening locally that makes you think you will be involuntarily retired?

My thoughts are all over the place on this one, but here goes:
1. Consider refinancing the remaining mortgage to a very low payment, in case you lose the job, then it won't matter much, but if you don't, continue the aggressive pay down of the mortgage. That way, if you lose the job you may not have to find another one to pay off the mortgage and get your free time anyway--that's the ultimate goal isn't it. We refinanced in 2003 which cut our interest rate, then paid more aggressively as my income afforded. Paid the house off about 3 weeks ago.

2. Can the 10 acres make you some income? Organic farming, tourism (hunting, fishing on private land?) It might be fun to look at that. One thing I inherited 4 years ago is a share in an orchard. I get $2K-5K per year passively, just managing the financial aspects of it.in our case, the orchard is in California and a reliable family operates our orchard, along with many other absent landowners' property. One of the principles of early retirement is making your money work for you, but you also have a significant chunk of land; maybe you can make that land work for you.

Anyway, these are a couple of my thoughts. Good luck figuring it all out!

 

[jim584672]

You have it made. Sell the house and retire. Just an opinion.

 

[Texas Proud]

You can probably do it now without selling...


Stop paying extra on the mortgage... that saves a lot right there...

Think different... what kind of mortgage do you currently have You could refinance to a 15 year loan and probably reduce your payments and interest rate... think of it as renting... my sis did this in her mid 60s, but did a 30 year loan... she does not care if she pays of the mortgage or not...

 

[robnplunder]

Just an observation - In current interest environment, I don't know about aggressively paying off the mortgage.

 

[Palimpsest]

Why don't you make a deal with yourself to stick with it for one more year and then reevaluate? Taking it year by year may allow you to see the light at the end of the tunnel while still shoring up the financial end of things. Youre not too far from social security in any case. The comments on the low interest rate mortgage are also good -- if you have a good low rate stick to paying that -- bank the remainder. If you dont have an optimal rate, lock one in while you are still employed and easily can.

 

[38Chevy454]

You are kind of the classic house poor - too much tied up in house equity. You do not have enough after tax money to just pay off the house. That would require dipping into the pre-tax money. So unless you sell the house, no way to get out of that monthly expense. You do not say how much your monthly payment is, I am assuming the difference between 30K and 60K each year, or approx $2500/mo for mortgage payment?

If you want to quit working, it seems your options are to sell the house and move to one you can pay cash for, and then you have plenty of money to retire based on your pension and savings. Plus you can get SS in 3 years if you want.

 

[almost_there]

Wow, I am blown away by all the responses.

EW-Gal:
I work for a supplier of medical IT systems. These systems are typically significant capital expenditures for a good size medical institution. The life-cycle of these systems is typically about 5 years. Due to uncertainty amongst our customer base the replacement cycle have been greatly lengthened and many customers and potential customers are simply minimizing capital expenditures. This is what makes things tenuous for my company. You are likely correct in that things will eventually stabilize. It is the time frame over which this will happen that concerns me. We have already lost some good people. Basically at the end of each fiscal year we wait for the dust to settle and see who is still around.

I refinanced a couple of years ago down to 15 years at 3.75. I do not think I will be able to do much better than that. Congrats on paying off your house. I hope to be there in about 3.5 years. I just sent in a 10k payment today.

I do not think I will be able to earn any significant income from the property. There is a possibility of earning some "hobby" level income. It has also always been my plan that when I no longer have the daily grind of a full-time job that a significant portion of our fresh fruit and vegetable needs will be supplied by the property. I'm hoping this will be a benefit of living in Florida.

Jim:
My wife tells me the same thing. Let's sell and downsize. I suppose it might come to that at some point but I'm just not ready for that. She takes some solace in that I have a term life insurance policy for $540k. That will be significantly more than she will need to pay off the mortgage. I do not want the house to ever be a burden for her. One reason I really like it here is because I some real significant garage space. I am somewhat of a weekend mechanic and have done a little fixing of things that people have given up on and selling them for some small side income. I hope to do more of that in retirement.

Texas:
I am happy with my mortgage terms at 15 yrs and 3.75. If I did not think i could pay it off pretty quickly I would have refinanced to 30 years to lower the payments last. In the end though I suppose it is still an option.

robn:
I never felt it was a big priority to pay it off until I got a bit older. Even with the low interest rate I want to get it paid off. I realize there is an emotional aspect to this. I always felt that I would have a paid off house in retirement.

palim:
Your advice resonates most closely with my own thinking. As I said, I do not think I can do much better that where I already am from a rate perspective. I like the idea of taking this year by year and re-evaluating. I am running all kind of what-if scenarios on spreadsheets as well. What helps me think things are going to work out is that my investments are doing so well. I feel like I am attacking on the issue from both sides. As long as the market is good and I'm socking away the max in my 401k the investment sides goes up at a nice rate. By throwing everything else at the mortgage I get to see what I owe decrease at a nice clip as well.

Chevy:
I basically agree with your premise about being house poor. I would never use my pre-tax money to pay this off except in an emergency. My monthly payment is just over $4k. That includes P&I and taxes and insurance. For the last several months I have been paying a minimum of $4k extra. I agree that I could retire easily by selling the house now. I am hoping that I can do the same in about 3.5 years without having to sell it.

Thanks to all for your advice and responses. You all know how to make a newbie welcome!

 

[clifp]

I don't think you need to sell the house of you don't want. At some point in your 70s or 80s you may want to just because physically keeping up 10 acres and big is difficult as you age.

You have expense of 60K and pensions of 30K so that leaves 30K you need to withdraw from savings or get from SS. I plugged in the number and added 2,000/month for social security at 66. which is probably conservative and got 100% success rate for a 35 year retirement.

How much longer you want to work is entirely up you tele-commuting is pretty sweet so you maybe in no hurry.

A couple of thoughts at 3.75% I would be in no hurry to pay of the mortgage at all. Let say you or the wife get sick, and work is no longer an option. You also start incurring reimbursement medical expenses. You'll want to have the flexibility to have a large pile of money to pay for stuff. Money you've paid down on the mortgage can't be withdrawn without selling the house.

 

[Kronk]

I would stop paying extra into the mortgage for the time being. $100k in easily accessible savings plus $30k/year is great, but with an iffy job and your current expenses, I'd want more of a cushion. You can always pay it off later with the money you've saved.

Just go with the flow... If you are willing to work a couple more years to stay where you are, do it. If you get laid off, reevaluate at that point and downsize if that works best for you at the time.

Sent from my Nexus 7 using Early Retirement Forum mobile app

 

[Katsmeow]

I don't really see that you have a problem. With your mortgage rate I don't see a reason to be in a hurry to pay off the mortgage. If you didn't have the pension I might say to sell and downsize, but with the pension I'm just not seeing the problem here. I understand the desire to have a paid off house in retirement. I certainly thought we would have one. But, when we could borrow at 3.49% for 30 years, it seemed to make sense to do that and we haven't been sorry that we did.

 

[almost_there]

Clifp:
Your calculations are pretty close. One thing though is that the 30k pension is the gross amount. Because I am still working I have tax withheld. The cost of term insurance policy also comes out of this since it was a policy that goes back to my working days with the company from which I now get the pension. So basically the net from the pension is only 24k (in retirement with no job, this would presumably be a bit higher since my tax burden would be lower, but that is what it is now). Meanwhile the 60k in expenses is the net amount ($5000 per month - this is a little optimistic as the expenses are usually a bit more than this but could be this if I really try). So at this level, the salary and pension can comfortable cover the expenses with enough level over to fully fund the 401k and be quite aggressive with the mortgage. I too have run similar numbers and can usually get 100% as well. This clearly tells me I am in the ballpark. Nevertheless, the extra couple of years of savings and the paid off mortgage I am hoping will give me a comfort level that I just don't feel right now.

Also, I actually made a typo on the mortgage rate. It is 3.375 not 3.75. The rate makes me happy. The monthly payment of $4020 (includes P&I, taxes, and homeowners insurance) is what is scary. Once paid off, this drops to $1065 (taxes and insurance). That is what will I hope give me that comfort level I'm looking for.

As you note, telecommuting is a pretty sweet deal. It was one of the reasons I looked for someplace that I would really like and probably brought a bit more house that I otherwise might have. I knew I'd be spending lots of time in it and I would not have the commuting expenses that most people have. I also brought at the height of the really hot market and stupidly thought that real estate would never be a bad investment. Fortunately, I have not been burned as bad as some. I have lots of equity in the house and have never been under-water. Also the market around here is starting to rebound and things are not as dire in general as they once were. Some of this will sound like I'm just justifying my thinking but as I said I like living here. I make no apology for that. When we brought the place I jokingly told my wife that the only way anybody would ever get me out of here is feet first

kronk:
Yep the iffy job situation is the potential fly in the ointment. My mental emergency job loss plan involves a few steps:
1.
look for another job and stay put - even if this works it will be a big step backwards since I doubt I will get near my current salary which means no more aggresively paying extra on the mortgage.
2.
If no job, make only required mortgage payments out of regular savings so as not to have any penalties for hitting retirement savings. The retirement saving penalty is not a big deal because if I am involuntarily terminated I believe there is no early withdrawal penalty for a 401k and I will be 59.5 soon enough anyway.
3.
Do the above for one year while taking any side jobs/part time jobs/ pizza delivery/lawn mowing etc then evaluate investments and decide if the house should go on the market or if I can hold out longer.

That's basically then plan.

kats:
Yep, the pension is a nice hedge and I know deep down inside is what will make this all possible if it works out. There is one potential hiccup with that. Since I am not 65 if the company paying the pension goes belly-up I will lose it until I am 65 and then get it back from the government fund that takes over defunct private pension plans. Fortunately the odds of that are pretty low but it is not impossible. Heck even government worker pensions seem to no longer be sure things. I also agree with you about the 30 year term. I could probably do a refi down to 200k and at 3.375 with a 30 year term my payment would drop by 2071. That too would make it possible to stay here. Unfortunately I would lose that option if I lost the job so it is something I would have to do first. I guess at some level its almost like rolling the dice isin't it?

Anyway thanks again to all. I just love this forum.

 

[almost_there]

Hi, back again. Still have my job. I am making a move on the mortgage. Current balance is down to 293k. I am doing a cash-in refinance at 275k for 10 years. This will lower my monthly payment by approximately $314. My intent is to continue to send the same amount (or more) that I am sending in now. This will allow me to pay it off at least 6 months earlier. I am (more) realistically looking at being done in about 3 years now (maybe even a little less). What made this possible is a refinance program from Third Federal Savings. They have a 10 year refi at 2.89% with a fixed closing cost of $295. The only extra is for Floridians (like me) that have to pay a special mortgage tax (will cost me about $1500). So far things are progressing according to some semblance of a plan. Hope it continues!

 

[38Chevy454]

Sounds like you made a good trade on the house mortgage, approx 11 mos break even and after that you start benefiting the payoff increase each month.

 

[Trawler]

Ten acres is a large lot. Do you feel that you could live with less acres ? If so is there opportunity to split land into some lots? See the new lots and keep your house. Typically you give the proceeds from the sale to the bank to pay down existing mortgage and they will release the land but check with them. Just a thought.

 

[supernova72]

My home lot in SEA is 4,000 sq feet so 10 acres sounds huge but I get it. If it were me I'd explore downsizing to say a $550K house and be debt free! Could you get a little smaller house and say 5 acres for $550K? Cheers.

 

[seraphim]

You're 59 and have a lot of years ahead of you. A quick set rhetorical questions: mortgage aside, can you LIVE on $30k a year, or merely survive on $30k a year. Not being a smarta$$, but someone who's retired early, and still wants to get out, travel and live. This costs money, and we mostly camp when we travel ( about 6 months out of the year). We have no mortgage, a larger pension, live in a low cost of living area, and I wouldn't want to survive on $30k a year for another 30 years ( or however long I have). And we have always been somewhat frugal.

Do you really WANT to retire? How does your SO feel about you retiring or not?

If you sell your house, what would have to pay for a replacement living arrangement? What about the cost of major maintenance if you keep that house?

What about the possible expenses of long term care for one or both of you?

Again, these are rhetorical questions for you to think about.

Personally, I'd have no qualms about retiring if I mentally needed to, but I wouldn't keep the house.$500k in investments could average a return of $20k a year that would cover rent, or the purchase of a smaller home somewhere with a lower cost of living. I wouldn't retire and keep those mortgage payments, or let my assets possibly detoriate in home equity.

It comes down to, "What's more important to you?" Only you can answer that.

 

[almost_there]

I've read everyone's thoughts and they have given me lots to think about. My goal is still to retire and live in my current home for as long as I am able to enjoy it. When my re-fi is complete it will improve my ability to become mortgage free ASAP. Even the job situation has somewhat stabilized and while I know I am not completely out of the woods, I am not spending quite as much time looking over my shoulder either. I've run the numbers again and believe that I could live in my current home on my pension and with a side gig or two without touching my investments as long as I'm done with the mortgage. When I'm old enough for soc security and medicare there will actually be a nice cushion. Seraphim asks: "Do you really WANT to retire?" That is a good question. I used to think retiring would be easy. I sometimes find myself thinking about how much additional I could sock away if I worked a few extra years while mortgage free. I suspect I will have to confront that for real sooner or later. The one line that I have drawn in the sand (as defined by a long discussion with the wife) is that I will not seek a full-time commuting job if I lose my current one. I have worked as a tele-commuter long enough that I do not think I could commute to a "regular" job any longer. That's not the way I would prefer to retire but it would save me from lots of soul searching.

 

[Milton]

I am 59 and have a good news/bad news situation…. If I were to sell out and down size I could probably retire tomorrow. The thing is that I really like where I live.… My main concern is that I will be involuntarily retired.… If something happens to my job my ability to rapidly pay of my mortgage disappears and the house basically then becomes a big drag on my ability to retire.

I don't see much bad news in your situation.

You are worried about a negative contingency (involuntary job loss) over which you likely have little if any control, and which may not happen. Sure it is a possibility, but so are many other potential problems.

Try not to get all stressed out. If the worst occurs, you'll handle it. You will either find another job (probably at lower pay, but still a job), or you won't. In the latter scenario, you'll simply sell the house and downsize. While neither outcome would be ideal, they would be far from the end of the world.

It may help to reflect that everything in life is impermanent. No matter how much you love your house, your job, your relationships, or anything else, someday you will lose them. Certainly it is inevitable that you will eventually die, and thereby lose everything that you have accumulated in life.

FWIW, on the basis of your posts I don't see any particular reason to be contemplating retirement. E.g., you haven't suggested that you hate your job, or that the time commitment is preventing you from pursuing more important things. It seems like you merely feel that you should jump before you are pushed.

If I were in your shoes, I think that I would not focus entirely upon aggressively paying down the mortgage and instead commit some of your surplus income towards building an emergency fund (say, enough to replace six months of lost income) that would allow you to put food on the table and make your regular payments. If you already have that fund set aside, relax, you have adequate 'insurance' in place.

 

[almost_there]

Hi Milton - thank you for your very thoughtful post. I am less stressed out these days than when I originally posted. I do have an emergency fund it place. At this point I am basically taking your advice and am going with the flow. If the job holds out fine. If not, I'll try to make a go of it without moving but if I have to sell out, so be it. While I do love living here, there are other places. Thanks Again!

 

[Sanbenito1]

+1 for Milton!

 

[heeyy_joe]

Keep working. Keep the home until you tire of either the job or the home upkeep.