Author Topic: Case Study: Retirement in OMY - or more, please comment  (Read 769 times)

freedom49

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Case Study: Retirement in OMY - or more, please comment
« on: January 28, 2019, 01:08:53 PM »
Thanks for giving me comments...just putting all this information together took a while and was a great exercise!


US: ME 49, HIM 51, KIDS 18,16,11 
      Married Filing Jointly
      Washington State (no state income tax)

TARGETED RETIREMENT DATE:  JUNE 2020

Income: Him 115,000 government employee - loves his job
             Me (manager of our real estate portfolio) 65000 net see below under rental income

Dividend income 4243
Capital Gain 2416

Pretax Deductions according to W2 statement:
             Him: 24,500 into 457 plan
                     21,047 employee sponsored healthcare coverage

Rental Income 155,000 
          Mortgage Interest: 20,000
          Mortgage Principle: 28,000
          Depreciation:23,000
          Other Expenses:  47,000
          Net 65,000
           Mortgages paid off in 15 years: 520k balance 4% interest

Taxable Income 171,000 last year's tax return (expected to be close to that)

Taxes: 24,336 last year expected to be about the same this year

Current Yearly Savings: 24,500 (457 from above)
                                   Max out Roth IRAS each -6500,5500
                                   27,000 in taxable accounts

Current Expenses
House Payment:  Mortgage : 1,088 monthly  P:5684 I:7372 (250k loan, 30 amt, 3.25% - 25 years left)
Property Taxes:   560
House Maintenance: 100
Term Life Insurance: 10 (150k policy on my husband began 15 years ago)
Haircuts: 20
Utilities: 225 Gas, Electric, Water and Sewer Garbage
              180 Phone, cable, internet (no other option in my rural area)
Cars:   3 cars,
             100 maintenance?
            400 gas
             150 insurance
Charity: 100
Child activities: 150
Holidays: 300
Clothing: 200
Computer: 10
Dining out: 100
Grocieries: 800 
Medical: 100
Cell phones: 85  (four phones on TING)
Travel: 1000  (not necessary but wanted)

Total: 7676 per month = 92000 per year


ER expenses:  I would like to plan for 115,000 in expenses moving forward.  I expect my expenses to increase for a while as we pay for healthcare and travel more with our family maybe.  As we get older 65+ and my kids get older my expenses should go down, but maybe not?.  Tax rate bracket will be 22%?

ASSETS:

35,000 Expected spending from Real Estate per year until age 67 when mortgages are paid off and then income increases to 95k conservatively (remaining 30k amount is saved because I am so conservative - Currently netting 65k)

42,540 Pension taken beginning Age 67 of husband
19,884 Social Security husband at Age 62
9,948 Social Security Me at my age 62

500,000 in Taxable Accounts + (30k x 2 years)
131,000 Deferred Comp 457 +25000x2 (2019&2020)
200,000 traditional IRA
286,000 Roth IRA  +13,000 x2 (2019&2020)

525,000 House Equity
750,000 Real Estate Equity
100,000 college fund for kids separate from retirement funding, this is enough for 3 kids, they pay the rest

Here’s How I plan to do it….

At age 67… the office park will be fully paid off and we can draw 93,000 from it  (35,000 grows to 45,000 in rent plust 48,000 in payments).  We will have 42,450 in state pension and 32,600 in social security payments at that time too. Total income will be  95k+42k+32k =  169k   At that time, 115,000 expenses inflates to 155,000, so we will be 14k more income than expenses.  So all is covered without any income from other sources.  Gravy. 

Now how do I fund ages 52 to  67?  The big 3 questions always......

Yearly required amount:  115,000-35,000 from Real Estate = 80,000 per year  until social security kicks in at age 62
COLA 3% increase
5% return on all balances per year except Real Estate increase in rent 2.5%

DRAWDOWN ORDER?  :  1)Deferred Comp - can be used as soon as separation from employer  2) Taxable 3) Traditional       4) Roth
         
                                                                       IRA             (457)
Age   Year   Spending   Pension         SS   Taxable   Traditional     Def Comp   Roth
(Beginning   
Balance 2020)                  560,000     200,000       181,000    309,000

53   2020   80,000      0      0   588,000   210,000       110,000    324,500

54   2021   83,000      0      0   617,400   220,500         32,553    340,725

55   2022   85,000      0      0   597,450   231,525         0       357,761

56   2023   88,000      0      0   539,322   243,101         0       375,649
   
57   2024   91,000      0      0   448,322   255,256         0       394,431

58   2025   94,000      0      0   376,738   268,018         0       414,152

59   2026   97,000      0      0   298,575   281,418         0       434,860

60   2027   100,000           0      0   313,504   295,489         0       456,603

61   2028   103,000           0      0   226,179   310263      0       479,433

62   2029   105,000           0       19,884   152,488   325,776         0       503,404
      
63   2030   108,000           0       20,481     72,112   342,065         0       528,574

64   2031   111,240      0       29,832             0   359,168         0       545,002

65   2032   116,802      0       30,727             0   377,126         0       488,255

66   2033   122,642           0       31,649             0   395,982         0       425,667

67   2034   128,774     42540        32,598             0   415,781         0       446,950
           (After age 67 Office Park mortgage is paid off and contributes 93,000 to living expenses instead of 35,000)
                    (Pension kicks in at 42,540 and SS is 32,598 =  168k covering living expenses of 155k)

67      DONE!!! See above information on funding the rest of retirement

      
 We have an 11 year at home until age 18.  So we won't probably go off too much.  My guess is my husband will keep his job for 2-3 more years and we will travel a whole bunch while he works...which is why travel expenses go up. 

Questions:  There are a LOT of scenarios for taking your pensions and SS.... how do I know which one is best?
Do I have the correct draw down order? 
How do I calculate my RMDs and what age should I take them? 
When do I convert my traditional IRA to Roth? 
What do I estimate my tax bracket to be after husband stops working?
Do I need a trust?
I feel like I am in my peak spending years do to the extra costs of teenagers and 11 year old, until they get out of the house.  I feel like when it is just the two of us, our spending will go down, but idk.... is this true?   

Do i follow the simple path to wealth guidelines or do I invest money according to a 60/40 split or bucketize?  Right now I am 80% index funds 20% cds and MMarket accounts

Our parents are 80 now, and I definitely foresee spending a lot of time back in the midwest in order to take care of them in 7-10 years...

Thank you very much for all your comments!




         
               
     

   
               
                         


Car Jack

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Re: Case Study: Retirement in OMY - or more, please comment
« Reply #1 on: January 30, 2019, 01:03:14 PM »
You have enough information there to make my head spin.  My thoughts are that you could FIRE right now.  My second comment is that your college fund, $100k for 3 kids would get them each through their Freshman year at a state college in my state right now.  No more.  By the time they hit college, I suspect they're going to have to live at home to even get that one year paid each.

I have one college senior going to grad school next year and another going to college next year.  I could rattle off college costs in my state from community, state, private without blinking.  I measure a bachelor's degrees in cars.  My oldest is beyond Lamborghini Huracan and heading towards Aventador.  I don't mind paying for education, though for "real" majors with jobs at the end of them.

lhamo

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Re: Case Study: Retirement in OMY - or more, please comment
« Reply #2 on: January 30, 2019, 01:31:15 PM »
Your plan seems much more complicated than necessary.

If you want/plan to keep the office park rental long term, why not just pay off the mortgage now (or when your DH leaves his government job) and let the income from that fund your living expenses?  Without the mortgage payments the income would be just about enough -- you could tap into the 457 as needed.

Maybe it isn't fully optimized from a business expenses/tax perspective, but sure would be a hell of a lot simpler....