Author Topic: Looking for advice and candid assessment..Retire this year?  (Read 2860 times)

diymark

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Looking for advice and candid assessment..Retire this year?
« on: March 06, 2014, 09:43:54 AM »
Hello All,
This is my first post after reading many of yours. I thought Iíd start with a request for community evaluation. I first want to thank you for taking the time to read my post and hopefully encourage you to provide me with some feedback.
I have been wrestling with the goal of retirement for many years. Unfortunately until I found this blog early retirement meant 55 years old or maybe 50 if you were a civil servant.  That is just the way I was taught and thought the way it worked for everyone.
Iím now 54 years old with a 30 year working history. From day 1 I have never had a career it was always a job to me. I the entire time 3 weeks is the longest I have ever been away from the job. I made many anti-mustachian choices along the way, mostly early after graduating college. I was anxious to get the new car and the racing bike I had always dreamed of. Of course those choices brought debt. I quickly learned  those things did not bring me the happiness Iíd hoped for and I got the financial ship straightened out and unbeknownst to me started living a mustachian lifestyle. Bringing my lunch every day (thousands of peanut butter sandwiches over the years), commuting to work on a vanpool, never paying a single cent in credit card interest, and putting my experience as a motorcycle mechanic and engineering degree to work by always trying the DIY approach first. I now have an excellent woodworking shop in my garage that brings in some money through a side business (furniturebymarkDOTcom) and built an apartment addition onto my own house that generates rental income. OK, so that gives you a thumbnail of my personality, here is the nuts and bolts of the financial situation:
Assets:
401K - $400k
IRA -$200K
Roth - $50K
Home mortgage $350K, value $950k
Cash -$75K

Cash flow:
$1350/mo rental income from the apartment
Beginning August after reaching my 55th birthday I will be eligible for a $40k annual pension from my employer (rare thing these days).
I hope to generate $600-$800/ mo from the side business but I really donít want it to consume me.

Liabilities:
I have a teenage son that is college bound, which I expect to deliver a blow between $120-$160k. We have already put aside $90K and I want him to have some skin in the game so he will have to pay for the rest (probably loans/grants).

Expenses:
Iím running at about $4200/mo expenses. Here are the biggy recurring costs.
Mortgage, insurance, taxes -$2500 (I live in a expensive (but beautiful) place. Property taxes are high ($7k annually)
Food -$450 (we grow our own veggies in the year round sunshine)
CableTV, internet, land line -$175 (a benefit I supply to the tenant so itís a business expense)
Nat Gas -$50 (average mostly hot water and gas dryer, heat only 2-3 months/yr)
Elect $130 (I have a solar lease + very expensive CA electricity rates)
Water -$35
Trash $20
Car ins - $200 (2004 van and 93 pickup)
Gasoline - $80
Entertainment - $125 (netflix, dinning out, continuing ed classesÖIím learning about LEED green building :-)
Home Improvement - $200 (sort of my hobby, Iím always putting in a new window, building a patio cover, adding wainscoting, or something like that)
No car payments, cell phones, or starbucks lattes, or any other loans

OK, so I think I look pretty good on paper to retire at the end of this year. But why am I nervous? Kids are more often to have difficulty finding employment after school and might boomerang back. California is an expensive place to live and I still have a big mortgage. I often think about moving back to my college town in Fort Collins Colorado to lower expensesÖ.but will I be able to adapt to winter after 30 years of California living? And my wife has never known anything but California. My pension is great but inflation will shrink it going forward. A quick time value of money calc show it buy nearly half as much by my 75th birthday. Will Social Security be means tested by the time I reach 70 and the government may view me as too rich for payment? And of course heath care over the long term is very scary. So let me hear your advice. Thanks again for listening. Just sharing my situation is a help.


unpolloloco

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Re: Looking for advice and candid assessment..Retire this year?
« Reply #1 on: March 06, 2014, 11:24:51 AM »
Sounds like you'll have a surplus between the pension and rental income, and this doesn't count the retirement accounts (which at current value would net 26k/yr at 4% withdrawal) or your side business (another 10k/yr). 

Think about it this way: the retirement accounts, side business, and renter together would net $50k/yr with some inflation protection built-in.  You have the pension on top of this, which has no inflation protection, but will cover almost all of your costs for several years, while the other sources of income continue working towards building your wealth even higher for when inflation starts eating away more and more of your pension.  Also, you have ~15? years left on the mortgage, at which time, you'll lose ~20k?/year in expense.

Gimesalot

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Re: Looking for advice and candid assessment..Retire this year?
« Reply #2 on: March 09, 2014, 05:24:21 PM »
I think you are in good shape to retire, keeping your current lifestyle.  Your expenses are $50k and will be covered mostly by your pension.  You still have the income from the rental and from your investments.  In addition, your expenses will drop a lot after your finish paying your mortgage. 

As far as inflation goes, the investments have some protection, the rent is totally adjustable with inflation, as is your side business.  I think you don't have too much to worry about.

As for your son moving back, it shouldn't be that much additional burden.  You should make it clear that you expect him to contribute in someway to offset the costs.  Maybe helping you with the rental or side business, if he can't find a job.  If he can find a low paying job, you should ask for cash to put towards food and utilities.

Notice that I said that you can retire keeping your current lifestyle.  You didn't mention anything in your post, but is that what you want to do?  What a bout traveling or new hobbies?  One thing to keep in mind is that you can still change after you retire.  If your mortgage becomes too expensive you can move.  If healthcare is too expensive in the states, there are a lot of lower cost alternatives south of the border.  You will have a long life in which you can adapt, even after you are done working.

arebelspy

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Re: Looking for advice and candid assessment..Retire this year?
« Reply #3 on: March 09, 2014, 10:23:32 PM »
You look pretty good to me.

What does www.cfiresim.com say would have happened historically to someone in your situation?
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

hello867

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Re: Looking for advice and candid assessment..Retire this year?
« Reply #4 on: March 12, 2014, 10:15:35 AM »
I think there is enough cushion there. Go for it!