Author Topic: Enough to Retire  (Read 2336 times)

ilikeplanes

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Enough to Retire
« on: January 20, 2016, 11:45:37 PM »
Hi there, based on the numbers below would someone be able to assist if it looks like I have enough to retire based on the MMM 4% theory?

Annual amount wanted at retirement : $60K

Net Worth
Retirement Accounts $140K
Property Value $340K
Property Rental Income $14,000 / year
Investments $739K

Age 40

Thanks in advance



iamlindoro

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Re: Enough to Retire
« Reply #1 on: January 21, 2016, 12:00:41 AM »
You separate "Investments" and "Retirement Accounts," but I'll assume the assets are all invested in a 75/25 stock/bond allocation, or a proportion which is higher in stocks.  If so, then you have $879K in assets eligible for a 4% SWR, or $35,160 a year.  Add to that your $14K in rental income, and you have $49,160 in income a year.  Thus, if I am interpreting your numbers correctly, you do not yet have enough to satisfy your requirement of $60K a year.

Is the property whose value you list the same one providing the rental income?  If so, you could liquidate the property, invest the proceeds, and (assuming for a moment that they were completely tax and selling cost free) have $1,219,000.  This would still only give you $48,760 per year.

If, somehow, the property value you list is *different* property than the one producing rental income, then you could liquidate that property, get $48,760 + 14,000 = $62,760 per year, and retire.  But something tells me that's not what we're talking about here.

I'm wondering what made you ask?  Do you have questions about how the 4% rule works?  What made you think that these assets were sufficient to yield 60K?

sol

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Re: Enough to Retire
« Reply #2 on: January 21, 2016, 12:04:28 AM »
You need to find a way to generate an additional 11k per year, or save a total of 1.15 million dollars to generate that 46k using a 4 percent withdrawal rate.

GrowingTheGreen

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Re: Enough to Retire
« Reply #3 on: January 21, 2016, 07:24:38 AM »
As others pointed out, your investments are still short at this point.

You could easily accelerate your retirement by cutting your expenses from $60k to $40k. A $20k cut in your expenses means that you'll need $500k less in principal if you're using the 4% rule ($20,000/.04=$500,000).

In your scenario with the rental income, if you could even drop expenses to $48k a year, your non-real estate investmentss would need to generate $34k/year (48k - 14k = 34k). This means your non-retirement investment account would need to have a value of $850k (34k/.94=850k). You'd only be $110k short! You can either save up and wait until you hit 850k or retire early and use a part time job to bridge the gap.

In summary, if you reduce your expenses, you are VERY close.

With This Herring

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Re: Enough to Retire
« Reply #4 on: January 21, 2016, 04:27:12 PM »
As it seems you are not quite grasping the 4% SWR concept, I am wondering:

1) How is your $60K broken down? 
    Does it include expenses on the rental? 
    Debt payments of any kind?
2) Is that $60K your actual spending level, or is it your current gross salary?
3) Is that $14K of rental income net of actual expenses and a reserve for future unoccupied units and repairs of units?