Opinion needed from those who know how to retire!!!!! (years, support, best)

[Thinking-man]

Originally Posted by nuts2uiam

Pure plain and simple. Unless they have significant assets that you did not mention they should not consider retiring, let along planning on taking trips for 6 grand three times per year.

Why? You list "worth" on each of the three properties. There is a huge difference between what it is worth and the selling price, should selling be an option. You have rentals worth 900k with debt on those of better than 1/3 your guesstimate of their value. Pulling in $48,000 in rental income per annum, less the taxes and maintenance, may not net an appreciable income stream to pay for the $18,000 of vacations let alone anything else like the taxes, upkeep, food, health insurance, homeowners and auto insurance, daily living expenses.

They are also far enough away from Medicare eligibility that no one knows what will be with that when they are age appropriate. Now, the above would change if both rentals properties were sold and the proceeds invested but it still would be a tough road given the aggressive spending on vacations and current market conditions.

Please read post #7. That might help clarify some of the things you brought up.

[Huckleberry3911948]

why doesnt your friend post for himself? why the interest?

[mathjak107]

Originally Posted by TuborgP

Great article in the new Money Magazine titled: Building the New Retirement. It covers topics like draw down rates, spending in retirement and the first decade of being retired. It attempts to address the new realities and has some great contributors including Wad Pfau on drawing down your nest egg etc etc. Good thoughts on what now is a safe withdrawal rate.

thanks , now you made me want to go buy it ha ha . i enjoy reading wades stuff.

[mathjak107]

Originally Posted by Thinking-man

Here's a hypothetical situation based on the situation of family friends looking to retire:

ages 58 and 53 currently.

Assets:

Primary home: 1.1M worth
Rental 1: 600k worth
Rental 2: 300k worth
Cars: 2 (5 year old cars)
Savings: 400k bank


Debt:

200k mortgage on rental 1
150k mortgage on rental 2



Goals:
retire in 2 years.
travel 3 times a year (avg trip at about 6k?)
live as long as possible in the primary home


If this was you, how would you make it happen?

much to house rich and cash poor . only thing that is a given here is they do not have enough liquid assets to even plan around. perhaps they can sell off a living room so they can eat in 30 years.

especially since it is sitting in the bank.

what income do they need?

is that the total amount of risk they want to take?

[Thinking-man]

Originally Posted by mathjak107

much to house rich and cash poor . only thing that is a given here is they do not have enough liquid assets to even plan around. perhaps they can sell off a living room so they can eat in 30 years.

especially since it is sitting in the bank.

what income do they need?

is that the total amount of risk they want to take?

I expected a little more creativity and class from the great mathjak.

As mentioned in post 7, what i proposed to them was the following. if you disagree with this, perhaps you can show why and how...but 'selling a living room in 30 years to eat' isn't what i would consider very helpful, especially when it's not backed up with any evidence.

Within the two years before retiring:
- pay off the 200k mortgage in two years.
- sell the rental 2 and bank remaining 100k equity

They'd then be completely debt free, with 500k in the bank.

- live in the primary home for 10 years until age 70/65
- Income from rental1: 2500 a month (minus about 500 for taxes and maintenance)
- Income from SS at age 62: about 2000 combined
- after 10 years (at age 70 and 65), the cash is gone. sell the primary and the rental 1 and move to a townhouse big enough for two
- have about 1.5M in bank to live


based on the above, they'd be able to have about 65k+/yr after tax money.....

[LookingatFL]

What is the housing market going to be like in 10 years?

What is the inflation rate going to be in 10 years?

Are they going to be able to keep to a frugal lifestyle? That isn't so easy to do.

Here is information that I've told before, but you probably didn't read that thread. My husband doesn't understand what the future value of money means. Actually, none of his family has any understanding of inflation. My husband wanted us both to retire. He has pensions. Only one of his pensions (the smallest one) is adjusted for inflation. That means, basically, that the amount of money we are living on today is going to be the same amount of money we are living on in years to come. It also means that it will buy less because as prices of goods rise, our income doesn't rise in step. But, my husband can't understand this. So we are living an experiment.

His pensions are greater than $65K per year. We live in a high cost of living area.

The experiment is that all of my earnings are going into savings and we are pretending that my income doesn't exist. We are living on his pensions only. No matter what happens, my income is not going to be used to help. We are in our 5th year of this living experiment.

The first year we lived very happily. We went out to restaurants frequently. He had cable TV with all of the channels. He had Netflix, we went to movies and plays. We had a subscription to the Opera. We didn't use coupons.

But by the second year our property taxes increased a lot. Our food costs increased. The dogs' vet increased his fees. Utility prices increased. Our homeowners and automobile insurance increased. Cable TV increased. Telephone increased. I had to start making changes. We stopped eating out. We gave up the subscription to the opera. I shopped for less expensive insurance. We started using coupons.

By the third year I had to cancel the Cable TV and the landline phone. We stopped going to movies. I started budgeting for everything.

Last year I had to call the Internet company and ask them to reduce our monthly rates or I was going to cancel service. They dropped my rate by $10 per month. I cancelled 1 cell phone plan instead. We started to keep our house at 65 degrees in the winter and the house at 80 degrees in the summer. We are uncomfortable.

Just this week we had an emergency. I had to spend $14,000. It wasn't in the budget.

Suddenly my husband is understanding what inflation and fixed income means, because we are living it. He wants me to sell this house and buy one that is smaller. That actually won't help because the real estate market here is very good so our home is less expensive than a smaller one would be. The property taxes on the smaller home would be higher than this house. We are stuck here for the time being.

I am not through with this experiment. Because 5 years is nothing. We have a whole lifetime to live on his pension. He needs to see what happens when there is nothing left to cut.

Why don't you have your friends try living the same experiment we are living. See how long they would be able to afford to travel with only $65K to live on. See what lifestyle changes they would have to make over time and determine if that is what they want to do.

[mathjak107]

Originally Posted by Thinking-man

I expected a little more creativity and class from the great mathjak.

As mentioned in post 7, what i proposed to them was the following. if you disagree with this, perhaps you can show why and how...but 'selling a living room in 30 years to eat' isn't what i would consider very helpful, especially when it's not backed up with any evidence.

Within the two years before retiring:
- pay off the 200k mortgage in two years.
- sell the rental 2 and bank remaining 100k equity

They'd then be completely debt free, with 500k in the bank.

- live in the primary home for 10 years until age 70/65
- Income from rental1: 2500 a month (minus about 500 for taxes and maintenance)
- Income from SS at age 62: about 2000 combined
- after 10 years (at age 70 and 65), the cash is gone. sell the primary and the rental 1 and move to a townhouse big enough for two
- have about 1.5M in bank to live


based on the above, they'd be able to have about 65k+/yr after tax money.....

they need to get rid of the real estate then we can plan. but with so little cash there isn't alot to figure out at this point..

[Thinking-man]

Originally Posted by mathjak107

they need to get rid of the real estate then we can plan. but with so little cash there isn't alot to figure out at this point..

huh?
so you're saying 'sell everything and make everything liquid and then we can start planning'? lol sorry mathjak. i don't know how people here have such high regards for your posts with comments like that! hehe just kidding

I provided a serious 'plan' above....along with a timeline and the strategy for their retirement and you've not only not addressed this plan, but are saying that there's no planning until there's no real estate and there's more in cash.

[augiedogie]

Before you sell anything or give notice, I'd give some serious thought to what your desired lifestyle will cost. That will help. Lots of folks could do it on what you have, but some people aren't happy with "the simple life".

[harpoonalt]

Retirement should be about simplifying your life and having fun. Being a landlord is anything but fun or simple. I'd liquidate the real estate, which in this day and age could take awhile. There are expenses involved with selling real estate. 6% commision around here plus you need some bargaining room. Find a nice house on one floor and pay cash for it. Figure out expenses and structure your cash to generate what you need.

I'm 5 years away from retirement and my plan is already in place. I have my house which will get sold BEFORE I retire. My finances have been simplified to make my life easier in retirement. My numbers are pretty solid and my assets fairly liquid. When I cut the cord and retire my options are wide open. Real estate ties you down and values fluctuate all over the place. Case in point. We sold our house to build our current one 9 years ago for $365,000. It sold last year for $265,000. We lucked out and hit the top of the market. Our neighbor built his house and had his house listed at $675 ,000. He sold it 5 years later for $475,000.

Your numbers are pretty general. Have you actually had a real estate agent give you a number? Subtract 10% for negotiation and 6% for real estate commisions. And that's today.

I Wouldn't try to make any plans with real estate such a big part of the plan. Values vary too much, tenants don't pay, major repairs hit. Sometimes, cash is King.