I don't post here often, but respect the intelligence and fairness of this forum ... let me post a friend's challenges here, and get your input. My perspective is blurred by our relationship.
His situation is as follows:
Emotionally, what he wants to do is join his girlfriend, and get whatever job he can in that market. Tough choices.
Here is what he and I have discussed so far ... assuming that, mentally, he has truly run his race, he could:
Good friend, and I would like to help him find more happiness. Life could be better for him and his girlfriend.
Any suggestions? Thanks.
His situation is as follows:
- Executive, 56, who is really burned out. Used to make $200K+ annually in a "C" level position, but really doesn't believe he can hold down such a job in the future. Not sure he can even work at all, but I believe he will heal in time.
- He divorced last year, and is paying $3K alimony per month, plus $1,600 per month in child support. (Following his severance period below, he'll still owe about $50K total to his ex for alimony and child support.)
- He is on a severance now from his last job, ending in 10 months, over $200K/yr.
- His total net worth is probably $950K now (half of pre-divorce) ... $400K in realistic real estate equity (net of debt, and at reasonable values in this economy ... $100K home, $300K rental), and $550K otherwise (of which $325K is IRA's).
- Following the divorce, he is living alone in their 5 bedroom home, and clearly getting more and more depressed. He should move just for the sake of his mental health.
- He has a very close girlfriend living in a western city, and they are in love. Separated by many miles.
- She makes $28K annually, stable job, one boy finishing college and the other halfway through high school. The boy's have / can get scholarships to the state university.
Emotionally, what he wants to do is join his girlfriend, and get whatever job he can in that market. Tough choices.
Here is what he and I have discussed so far ... assuming that, mentally, he has truly run his race, he could:
- Sell his real estate, pocket the $400K, with the only complication he would need to 1031 $300K of it to defer tax. He could buy his girlfriend's place for $100K, and she could "rent" it from him at a fair market rental. Invest the remaining $200K in rental property(ies) Otherwise, he has $100K to use ... see 3.
- He could start 72t distributions of roughly $19K annually.
- He could use the remaining $275K liquid ($225K + $100K home net, less $50K to ex) to produce another $11K, or roughly $30K annually in total, at 4% safe withdrawal.
- That $30K plus his girlfriend's roughly $28K salary would give them about $58K annually, plus they'd be better off by another $8K they would together save annually in P&I payments on her home. In other words, they'd have $58K pretax to live on, in a paid off home, plus whatever rental income the other $200K produces.
- Age 62 comes in 6 years for him, and he should have another $20K in social security at that time.
- Whatever job he gets in the meantime simply bolsters their annual $58K plus rental income, and gives more room for savings.
Good friend, and I would like to help him find more happiness. Life could be better for him and his girlfriend.
Any suggestions? Thanks.