Author Topic: Case Study- Oldies but Goodies  (Read 2745 times)

HappyCamper

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Case Study- Oldies but Goodies
« on: January 29, 2014, 04:28:39 AM »
Hi All,
Loving the blog! It is so helpful to us at this point in our lives.... even though we are too late for ER we are still feeling very young at heart!
I hope the following transition I am trying to describe is not too confusing as we are retiring this year:

Income now: Until August '14, $130,000 annual salary (adjusted for Foreign Earned Income Exclusion means -$95,000 = $35,000 AGI) $8,900 monthly take home after host country taxes from my husband's work from now until July 31st

Income after July '14 When he is off the payroll and we start our new adventure:
               One of us is 67 - not yet collecting social security, eligible for about $2124 at 67y (increases to $2597 if wait until 70y);
              The other one of us is not yet eligible (64y) for three more years, at 66 will be $2228, $2740 at 70y

Current Expenses Living abroad, high expenses on rent and utilities and travel back to USA plus we are enjoying our overseas adventure (way too much?):

Rent = $3000 mo
Condo fees = $212 mo
Utilities = $400 mo mo
Annual trip home = $3600 flights + $1500 expenses while there +$5100/12 = $425 monthly prorate
Food, gasoline, entertainment, local travel = $2000 (punch?)
Charity = to Church and Family $750 mo

Expected post retirement Expenses = $ 2500 mo IF house (don't have yet) is paid off and we pay cash for used cars
                   would include insurance on one car, health insurance, homeowners insurance, professional liability if we decide to work PT

Assets $740,000 retirement portfolio mixture of about 30% bonds/30%cash/30%stock mutual funds/10%REITs/Commodities, in tax advantaged accounts
                      not counting social security
                    $150,000 cash in Money Market at a bank in a taxable account
                    $7,000 cash from sale of Ford Fiesta when we leave our job here

Liabilities approximately $300 credit card debt, paid in full monthly

Specific Question We'd like to buy a house for our retirement years, approximately 2200 square feet, new or used. Can we afford it? Or, how should we best do the financing? Location in Kansas or Colorado (We had actually ID'd Longmont as our preferred location last summer before discovering this blog! )Prefer to use one survivor in terms of Social Security in the calculations in case one of us precedes the other they will still be able to keep the house.

While we are sorry we didn't find the Badassity method many years ago, we hope someone will have mercy and take our case on :)
« Last Edit: January 29, 2014, 10:55:48 AM by HappyCamper »

aj_yooper

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Re: Case Study- Oldies but Goodies
« Reply #1 on: January 29, 2014, 06:59:44 AM »
If you haven't already, I would  look into File and Suspend options with Social Security, like :  http://www.kiplinger.com/article/retirement/T051-C000-S004-strategies-to-boost-your-social-security.html and http://www.pbs.org/newshour/rundown/2013/03/how-a-start-stop-start-strategy-can-maximize-your-social-security-benefits.html  and http://gersteinfisher.com/resource/social-security-timing-is-everything/

If your retirement assets are principally in taxable accounts, you are in a good spot to reduce taxes, if you can stay at least in the 15% marginal tax bracket.  You could harvest long term capital gains and pay no taxes on them if you stay in the 15% bracket.  While in that bracket, you could convert tax advantaged accounts to Roths. 

If your retirement is principally in tax advantaged accounts, you would probably benefit from moving them to Roths; you could live off your cash and taxable accounts  while doing this process. 

So, if you are interested, post where your money is located, i.e. taxable, 401k, Roth.




plainjane

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Re: Case Study- Oldies but Goodies
« Reply #2 on: January 29, 2014, 07:08:31 AM »
How are you going to manage post retirement expenses of $2500/month given your current spending habits?  You currently spend $2750/month on charity, food, gas, entertainment & otherwise life.  Are you just going to stop giving?  What does your family think about that?

And for two people, what the HELL are you planning to do with 2200 square feet?  You realize that you need to heat that?  Clean that?  And you'll probably end up furnishing it just because... (and you'll be furnishing from scratch OR shipping stuff across the world) Are you going to be running a boarding house or B&B?  And that probably comes with land around it.  It just makes my head ache.  We have 1400 sq feet with two people and it's too big.

Once Social Security kicks in and if you can get your living expenses down it looks ok, but the numbers and assumptions you're making right now are scary.

HappyCamper

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Re: Case Study- Oldies but Goodies
« Reply #3 on: January 29, 2014, 11:00:24 AM »
Dear AJ,
Thanks for the links. I added to our post that the 750 is in tax advantaged and the 150 in taxable.

Also thanks to PlainJane,
Maybe the 2200 will accommodate folks in the family that are now getting support? Remains to be seen.
But hopefully we will be able to continue helping.
Hope to live frugally and with a low impact on the environment when we come home.
Meanwhile, like you said, we are really living it up in the last year of our full time working life.

But can we should we get a house at all???? or rent? 

plainjane

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Re: Case Study- Oldies but Goodies
« Reply #4 on: January 29, 2014, 11:30:55 AM »
You don't know you can live on the budget you have planned for.  You don't know if they people you're currently helping out will be living with you.

Don't buy a house until you have got both these things sorted.