Having second thoughts....

[bearkeley]

Hi - been on this board for awhile but unlike many here, the market correction is causing us to doubt our plans for retiring this November.

Can you review our financials and share your thoughts?

About us: 46 and 48, no kids. Plan to travel and live outside the U.S. Half the year; lifestyle choices include house sitting (free housing and car), long term renal vs hotels, live in low cost markets (like the Philippines)

Financial situation: Planning to live on 8k/month (2200 mortgage; will take advantage of ACA subsidies and put aside 1500/month in HSA; rest is enough to cover living expenses and also fun activities (scuba, sailing, etc)

income from:
- 3k from rental properties (10k rental income a month, 7k for operating expenses and enough cushion, based on 10 yr rental experience for rainy days)

- 2k from an owner financed loan at 8% return (2 years payment history)

- 3k from investments (500k of investments set aside in Vanguard for this purpose....will utilize tax minimization strategies... HSA, Roth Conversions, etc to withdraw but psychologically, this is our pot of money to live off of or access if absolutely needed)


Assets:

- Investments of 1.94 (includes 500k Vanguard and 300k Mortgage Loan) with remainder in 401ks and IRAs as of today....80k drop from 30 days ago.
- 6% cash
- 25% bonds
- 51 % stocks (37 U.S.)
- 16 % mortgage loan (8 percent return)

- primary residence (125k equity...conservative estimate...may sell in a couple of years when market improves or we decide to live internationally)

- rental properties 9 units....5 sfh and 4 condos in 3 states (950k in equity ....conservative estimates). We will eventually liquidate but right now, all have positive cash flows and are profitable so no specific plans....when we do liquidate, will implement tax minimization strategies as well.

- in addition to the 110k cash above, we also have 30k now in savings / checking and expect another 50k by the time we resign in November

- My husband will get a pension of 2k a month at age 55 plus approx 5k for SS benefits between us at retirement age


So....do the numbers make sense for us to be FIRE or are we nuts?


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[Fishingmn]

Congrats on your impending retirement! You still look very good to me.

Less than 3% SWR if you lump your investments together (inc. loan) and with the upcoming pension it makes it even more comfortable. Assuming your expense projection is correct you should be fine.

I feel your pain on the loss - my DW is retiring in November as well but I've rerun the numbers multiple times this week and even if stocks lose 30% more we will be fine. More than that and we might have to talk.

 

[pb4uski]

+1 I get ~3% too before pension or SS. Relax and try to ignore the market lunacy as much as you can.

 

[Dawg52]

If it makes you feel any better, I'm sure there are a lot of people who just retired or about to retire that have raised an eyebrow to the latest correction. On the surface, you look good but there is the 'comfort' factor to consider. Only you can decide if that is good to go.

Best of luck.

 

[Midpack]

If it makes you feel any better, I'm sure there are a lot of people who just retired or about to retire that have raised an eyebrow to the latest correction. On the surface, you look good but there is the 'comfort' factor to consider. Only you can decide if that is good to go.

Best of luck.

Would depend on whether one is FIRE, SIRE or somewhere in between. Crucial difference...

 

[TimSF]

I envy your relatively young ages, excellent planning and position, and exciting adventure ahead! Your stats certainly look good to me, but what does Firecalc say? Don't let your careful long-term planning be upended by market volatility. This may in fact be a good test of your emotional resolve. Best of luck!

 

[bearkeley]

Would depend on whether one is FIRE, SIRE or somewhere in between. Crucial difference...

Midpack....not familiar with SIRE....or in between...can you elaborate?

All - thank you for the reassurance. It truly makes a difference! (Funny how strangers online can make such a huge difference!)

FireCalc looks good for us as well....I guess it also helps to not have kids to leave $s too....we could totally use it all up if we wanted to, assuming of course we can successfully transition from a savings mentality! (We plan to play psychological tricks on how we 'pay' ourselves monthly to avoid meltdown during times like these!)




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[TimSF]

All - thank you for the reassurance. It truly makes a difference! (Funny how strangers online can make such a huge difference!)





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Agree with this wholeheartedly. We can talk about this stuff here whereas it is next to impossible to discuss our detailed financial situation and early-retirement plans with our closest friends and colleagues.
What a gift this site is. Thank you, "early retirement.org"!

 

[haha]

+1 I get ~3% too before pension or SS. Relax and try to ignore the market lunacy as much as you can.

Certainly good advice. But which is the market lunacy, this abrupt downdraft, or the bloated valuations that most of us tolerated in our portfolios prior to the downturn?

Ha

 

[Willers]

Midpack....not familiar with SIRE....or in between...can you elaborate?

SIRE = Secure income, retire(d) early

One other thing to keep in mind is that when the pension kicks in it may limit your ability to do Roth conversions if you want to keep the ACA subsidies. It appears that you are still OK, but it's something to take into account in your planning. A good problem to have.

 

[Willers]

But which is the market lunacy, this abrupt downdraft, or the bloated valuations that most of us tolerated in our portfolios prior to the downturn?

Ha

Do we have to choose? Both?

 

[pb4uski]

...But which is the market lunacy, this abrupt downdraft, or the bloated valuations that most of us tolerated in our portfolios prior to the downturn?...

My answer: Yes.

 

[Fermion]

You need 8k a month to live on (which doesn't sound like cheap areas to me) and your pension plus SS gives you 7k, plus you have a 2 million net worth? I think you need to work another 10 years. Just to be extra safe.

 

[bearkeley]

You need 8k a month to live on (which doesn't sound like cheap areas to me) and your pension plus SS gives you 7k, plus you have a 2 million net worth? I think you need to work another 10 years. Just to be extra safe.

8k is huge because of a mortgage we still have on our primary. We love the place but with our lifestyle (traveling), it doesn't make sense to keep it. Figured we would get it ready to sell next year (yard work mostly) and see if the market picks up. (It's a rural waterfront area so it's just starting to recover now). When we sell, we would definitely move into a lower cost of living option. If we find a location we like during our travels (Philippines, for example), our insurance expenses would also drop significantly. Until then, we still need to set about 5k aside.

2m in investments plus real estate as of yesterday...trying not to look at the market today given recent advice from 'above' ....


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[Fermion]

Sounds exactly like our place (rural waterfront). Everyone wants to live in a high rise in the city. Property prices even for waterfront in rural areas still have not recovered from the crash.

 

[TimSF]

Sounds exactly like our place (rural waterfront). Everyone wants to live in a high rise in the city. Property prices even for waterfront in rural areas still have not recovered from the crash.

True. Our lovely place on a rural river in NorCal is still about 10% below the 2005 price we paid for it.

 

[audreyh1]

Certainly good advice. But which is the market lunacy, this abrupt downdraft, or the bloated valuations that most of us tolerated in our portfolios prior to the downturn?

Ha

I do tend to think valuations were bloated. And I'm glad I took withdrawals when valuations seemed high, even if it was more than we needed to live on.

 

[haha]

Do we have to choose? Both?

Don't have to do anything, But I can't think of a more relevant distinction to make

Ha

 

[Rothman]

You need 8k a month to live on (which doesn't sound like cheap areas to me) and your pension plus SS gives you 7k, plus you have a 2 million net worth? I think you need to work another 10 years. Just to be extra safe.

+1 let me jump on the SWR < 1% bandwagon! at that level about 1/2 your dividend income can add to your equities holdings to be safe for market downturns. Or you could retire today, since you really do have enough for any reasonable scenario of risk.


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[Markola]

You are clearly scrappy folks to have put together such diverse assets so young, and have a pension to boot. I bet you could quit and adapt as necessary. We are a couple years older and also don't have children, which takes away a lot of risk and mental burden since we don't have to be tethered to school districts and save for college. Still, just to play "What Ifs", do you really want to try to manage U.S. real estate from the Philippines and traveling the world? I am not experienced in real estate, on purpose, but that seems a headache to this novice. If all of the RE was liquidated and something like $2 million invested, a 4% SWR would kick off enough to live really comfortably wherever you want to be. Also, in case you don't know it yet, the Go Curry Cracker site/blog seems a perfect fit for your interests. You are inspiring!


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[Rickt]

Congratulations on accumulating retirement assets at such a young age. A couple of things bother me about the plan viz:
1. Home Mortgage is high. It would be safer to have no mortgage payment.
2. Owner financing: At 8% it is a good investment. Hope you don't have to foreclose in the future though.
3. Rental Units: May need capital improvements in the future. Also how are you planning to manage them while you are overseas for an extended period of time?

Good Luck.

 

[bearkeley]

M Still, just to play "What Ifs", do you really want to try to manage U.S. real estate from the Philippines and traveling the world? I am not experienced in real estate, on purpose, but that seems a headache to this novice. If all of the RE was liquidated and something like $2 million invested, a 4% SWR would kick off enough to live really comfortably wherever you want to be. Also, in case you don't know it yet, the Go Curry Cracker site/blog seems a perfect fit for your interests. You are inspiring!

Your point about RE is a concern, and long term, we definitely plan on selling. Our exit strategy isn't clear yet, but definitely want to time it well (huge casino being built near 3 of our houses currently) and maximize tax implications.

Oh and yes, Go Curry as well as others like them have been an inspiration to us!

Congratulations on accumulating retirement assets at such a young age. A couple of things bother me about the plan viz:
1. Home Mortgage is high. It would be safer to have no mortgage payment.
2. Owner financing: At 8% it is a good investment. Hope you don't have to foreclose in the future though.
3. Rental Units: May need capital improvements in the future. Also how are you planning to manage them while you are overseas for an extended period of time?

Good Luck.

Yes, mortgage is too high, esp finally if we really are gone half the year.... Would plan to sell our primary in 2017 or sooner and either rent or get a low maintenance cheaper home when we find a good home base. We love he house but just not the right fit for our lifestyle...

The owner financing property is actually non owner occupied so if we need to foreclose, we would be able to do it easily. It is also worth more today than the loan value, so risk is pretty slim that this would be an issue. He will most likely sell and pay us off early ...at that time, we'll have to figure out where to reinvest!

And yes, you are absolutely right about the rentals. We may have a vacancy right before we leave for our trip in December, so that will be an issue. We'll most likely need an agent to help us, but aside from that, will try to manage remotely (been doing it I now from 3 hours away, so aside from time differences, hopefully we can manage short term). Also putting reserves in place in case it is vacant until we return....not ideal but at least we can enjoy our travels and not stress too much!


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