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Old 08-28-2016, 08:41 AM
 
Location: Pennsylvania
30,270 posts, read 16,025,879 times
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Quote:
Originally Posted by mathjak107 View Post
the problem with loans is you need the income to pay for them . generally you are short the income in the first place and that is why you need a loan.

counting on borrowed money at a time you are short cash to make ends meet is never a good idea .
totally agree but if we're talking emergencies you do what you can when you can and pick up the pieces later.
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Old 08-28-2016, 09:17 AM
 
Location: East TN
10,998 posts, read 9,635,324 times
Reputation: 40097
Yes, we have money left over from our pension and rental income each month and we just transfer the excess to our savings account. We've used it for a new HVAC, a dental implant that wasn't covered, travel, re-doing the awful kitchen lighting, basically any thing that would be outside the regular monthly budget. It's there for any true emergency too, although we haven't experienced any lately.
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Old 08-28-2016, 09:50 AM
 
Location: TN/NC
34,851 posts, read 30,941,798 times
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On paper, people should always have an emergency for maintenance and wear and tear type items. That doesn't change for retirees.
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Old 08-28-2016, 11:29 AM
 
Location: Chicago area
18,750 posts, read 11,724,355 times
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Yes we have back up money for the back up money and back up money for that as well, other wise I'd still be working.
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Old 08-28-2016, 12:06 PM
 
3,745 posts, read 4,055,464 times
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Quote:
Originally Posted by aslowdodge View Post
If you are retired, do you keep an emergency fund?
Do you have cash outside your retirement nest egg to use an emergency fund, or is your nest egg the emergency fund in itself?
Long story short is I wound up retiring early having invested in rental houses and making enough to retire early. I plan on fully spending every month the net rents that I get. Before I even collect the rent I put aside 10% of the gross rents for repairs. Basically I guess my situation is a little bit different than others in that mine is all in real estate and many others have their money in stocks etc. so in the traditional sense I am never really pulling out any of my principal since I am not selling any of the houses and they are all paid off.
I don't know if there's anyone else in this situation here on this forum but since there are other retirees here I'd like to see what they think. I recently posted this in the personal finance forum and someone's suggested that it might be better to post this question here.
Thank you in advance
I think you would get better answers in the business forum (because you are essentially running a business) or real estate forum (real estate investors will be in a better position to answer your question). My answer is that if all you have is your retirement income (pension, SS) and your paid for rental properties, you need a BIG rainy day fund in cash or stocks/funds, something that is liquid and can be accessed quickly. I would put aside as much as possible, and if necessary return to work, part time or full time to fund it. I like your strategy of having paid off properties that you never touch the principal, but I don't see it being viable unless you have a decent amount put away in liquid assets such as cash or stocks/funds.

As far as taking out a loan against one or more of your properties, I am sure it would break any investor's heart to have to dip into their paid for properties. In addition, a loan would be probably very hard to get under the rules revised after the 2008 financial crisis and could take a while; not good if you need the money in a hurry.
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Old 08-28-2016, 12:25 PM
 
2,411 posts, read 1,957,230 times
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Yes. Period. Just common sense, whether one is retired or not.


You 'prepared' for your business possibilities (by keeping x amount aside for repairs) ... why would you deliberately spend down (you said you 'plan on fully spending down ... every month' so it sounds deliberate) your personal income every month and not make an emergency fund a part of that too?
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Old 08-28-2016, 12:49 PM
 
105,902 posts, read 107,860,524 times
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keep on mind that all withdrawal methods in retirement assume that principal can always go to zero trying to sustain that inflation adjusted income .

you better keep some cash outside the buckets producing that income stream
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Old 08-28-2016, 01:38 PM
 
Location: State of Denial
2,480 posts, read 1,849,448 times
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Yes, I keep a certain amount of cash in a readily-available source (I can transfer it directly into my checking account) and the rest in other accounts. I would not be comfortable if I didn't have an immediate source of funds.
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Old 08-28-2016, 01:42 PM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,611 posts, read 57,588,206 times
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Yes you need an 'emergency' personal fund, as well as an 'emergency' rental property fund. (In addition to the 10% 'reserves' you are sytematically funding)

Yes, it makes great sense to have loans / mortgages / lines of credit on your investment props. Run several tax scenerios and take the most advantaged route for your situation. Getting a 'direct ($:$) write down' for interest expense is far better than a traditional mortgage interest deduction !

Stay liquid, but don't be afraid to use LOC when appropriate. Money is CHEAP at the moment. Enjoy the picnic while it lasts. Have a Plan B.

If any of your rental / income properties have 'beds' ..... Definately have an emergency fund to cover motels / safety for HVAC failures / fires / natural disasters.
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Old 08-28-2016, 01:46 PM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,296 posts, read 8,462,957 times
Reputation: 16565
Quote:
Originally Posted by Aery11 View Post
Yes. Period. Just common sense, whether one is retired or not.


You 'prepared' for your business possibilities (by keeping x amount aside for repairs) ... why would you deliberately spend down (you said you 'plan on fully spending down ... every month' so it sounds deliberate) your personal income every month and not make an emergency fund a part of that too?
I'm sorry, I probably wasn't very clear.

All my rentals all are paid for and being that the only money taken from them is the rent yield, so in that respect the "principle" value of them is always the same.
After paying for prop,taxes, ins, reserve for repairs, vacancy factor, and other expenses I keep about 50 to 58% of the gross rents for my income.
So if I make 9K a month I budgeted all of it to be spent enjoying life.

In this budget are all my living costs like housing costs, health insurance and visits, food, entertainment, everyday expenses like clothing allowance, dining out, hobbies ,etc. What is leftover after all that is used for autos and travel. If I have a short month I can always cut travel or something else until back on track.

The only thing that has been mentioned was the 20K dental bill one month that someone had which I have not allowed for that happening. Makes me think.
I have no debts and am single with no kids.

My original thought process was to keep 40 to $50K in reserve and when it dipped for some reason, cut back the more optional fun lifestyle things until built back up to that amount. I would build that reserve first before going hog wild and spending the $9k every month.

My thoughts are as I get older and health and energy goes down, a lot of travel can be done now rather than put off. One thing I will always remember was when I was in my 30's in the Carribbean just doing everything. At one point I stopped at a lookout point in a rented jeep. A cab pulls up with a very elderly couple who struggle to exit the cab to look at the view. I realized I didn't want to wait that long to travel as it would not be as much fun to be that limited.

I was just wondering what others who were retired did for a reserve if any, and where they kept it. Keeping $50k in my bank account seems like a huge waste.

One thing I failed to mention if it makes a difference is I am 59 in a few months. I have an Roth IRA holding more rental houses that I expect to collect an additional $25K a year tax free when I am ready to start withdrawing from it. Right now all the rents are just accruing in the account.
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