Author Topic: For those of you who are younger than 50, what are you doing for cash flow?  (Read 11128 times)

Melissa

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I am currently 40 years old with three teenagers in the house.  Within the next 5 years two of them will be done with undergrad and the youngest will graduate from high school.

Our net worth will be over $1M and there will be no mortgage.

My husband believes that he will have to keep working (at least part time) for 7 more years. At that point he would be 57 and I would be 52.  His concern is that we won't have enough cash flow to make it through.  I think he is wrong and I know (given his history and personality) he is often overly cautious.

He said to ask my FIRE MMM community what their approach is. He wants to know from people living through it right now

(If this question has already been posted elsewhere on the site please let me know.  I wasn't able to find anything)

kendallf

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I assume you're talking about cash flow as in, not paying a penalty to access your 401(k) or IRA before age 59.5.  There are numerous ways to do this, and they've been discussed extensively here.  Do a search for Roth pipeline, early withdrawal penalty, and you'll come up with a lot of threads.  Read the Mad Fientist's blog for a description of the Roth pipeline method:

http://www.madfientist.com/retire-even-earlier/

Read GoCurryCracker's blog for tax minimization tips, JL Collins stock series for more on this.

arebelspy

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For us, rental income.

In your situation, start a Roth pipeline.

Cash flow itself comes from sale of equities and dividends.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

StetsTerhune

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Cash flow itself comes from sale of equities and dividends.

My impression from the OP is that her husband is of the old-school "You may absolutely never sell equity, that would be 'touching principle' and is unthinkable."

If that's the case, you can tell your husband that that's a very dated notion. He may assume equity growth and sell some of them for 'cash flow.'  How much of them? The accepted wisdom is 4% of your portfolio (sold equities + dividends) can be spent each year. Some say 3%, some say 5%.




Melissa

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StetsTerhune, you are correct...and it's maddening!

I will be starting to work soon making 50k a year plus scoring half tuition for our daughter (and hopefully the other two kids) in the process. As dumb as this sounds, if I have to put it aside as 'cash' for 5 years I will. Then maybe he will feel like he can retire. MAYBE.......

StetsTerhune

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StetsTerhune, you are correct...and it's maddening!

Just tell him a random guy on the internet told you it's fine!

But on a more serious note, it does sound like you have some pretty serious expenses over the next few years with the kids going off to school. It's certainly understandable for your husband to be nervous about retiring early with that looming. Without knowing more about your current and planned expenses, it's difficult to say how justified that is, so I don't know if I can wholeheartedly endorse him retiring.

But as far as the "cashflow" thing goes, I can tell you that's nonsense, and he can trust me -- I have a lot of letters after my name on my business card.

Cheddar Stacker

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..it does sound like you have some pretty serious expenses over the next few years with the kids going off to school. It's certainly understandable for your husband to be nervous about retiring early with that looming. Without knowing more about your current and planned expenses, it's difficult to say how justified that is, so I don't know if I can wholeheartedly endorse him retiring.

I agree with this. It's really hard to give advice on whether you are ready with such a large piece missing from the puzzle. $1M NW, awesome. No mortgage, great! Expenses? Could be $50K/yr, could be $320K/yr? If you believe you'll be solidly in/around that 4% range even with the college tuition variable I think you're fine. Hell, with your husband at 45 (I think) you really only have to fund your full expenses for about 20 years until SS kicks in, so you might be able to go much higher than 4% during the college years.
 
In case you haven't seen this before, it might help convince your husband where the cash flow comes from:
http://livingafi.com/2014/05/09/drawdown-part-1-the-basics/

Exflyboy

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If he will be leaving his position at age 57, he should be able to tap his 401k without penalty.

Sample of the many internet references that address this:

https://www.irahelp.com/slottreport/age-55-rule-taking-money-out-company-retirement-plan

Hope this bit of information eases the cash flow worries.

Check your specific plan though.. I am working part time for a company with a 401k and my "age 55" year starts on Jan 1st 2016.. Great.. Roll all my 401k money into the current 401k and start making withdrawals..

Not so fast!.. Turns out my current 401k plan will only allow a 1 time withdrawal of 100% of the account prior to 59.5 years old.

So that would be a huge income tax bill in that year. I could roll most of it into an IRA and take just a small amount as a distribution to get around the tax bill, but then the rest will be locked up until 59.5.

So great in theory, not so great in practice in my case.

Thankfully I do have about 11 years of savings in after tax accounts so it should be a non issue.

jim555

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Interest, dividends and draw downs as needed.

TomTX

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If he will be leaving his position at age 57, he should be able to tap his 401k without penalty.

Sample of the many internet references that address this:

https://www.irahelp.com/slottreport/age-55-rule-taking-money-out-company-retirement-plan

Hope this bit of information eases the cash flow worries.

Check your specific plan though.. I am working part time for a company with a 401k and my "age 55" year starts on Jan 1st 2016.. Great.. Roll all my 401k money into the current 401k and start making withdrawals..

Not so fast!.. Turns out my current 401k plan will only allow a 1 time withdrawal of 100% of the account prior to 59.5 years old.

So that would be a huge income tax bill in that year. I could roll most of it into an IRA and take just a small amount as a distribution to get around the tax bill, but then the rest will be locked up until 59.5.

So great in theory, not so great in practice in my case.

Thankfully I do have about 11 years of savings in after tax accounts so it should be a non issue.

Have a look at my thread today for a potential solution by rolling to your own 401k.

http://forum.mrmoneymustache.com/welcome-to-the-forum/a-novel-approach-to-free-access-of-tira401k-money-at-age-54-55-instead-of-59-5/

Erica

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Re: For those of you who are younger than 50, what are you doing for cash flow?
« Reply #10 on: December 05, 2015, 08:18:38 PM »
Main Job-
I work about 36 hrs per wk during the week + once a month, I work a full weekend. I work 18 hrs straight two days a week. I am paid for sleeping 8.5 hrs  of the shift (although I am woken up for about 1 minute each night but I fall back to sleep quick, she checks in about 10:30-11am somtimes waking me up)

It averages to $12 hr.

I pay $10 month for medical benefits. Pretty great plan actually, not just catastrophic but it is actually usuable

Dental is free because I am Native American. There is no 401k plan though


Sometimes I paint with my husband who is a painting contractor


California closed most of the mental institutions a few years ago. Some of the people left cannot be alone. It's cheaper to hire a staff to be with her every waking moment than it was for her to live in the mental institution. If she has no staff, she gets anxious and ends up having breakdowns or will light the apartment on fire, anything you can think of. She's crazy but it's an easy job. She's good usually with support. It costs taxpayers more to let her be by herself for any length of time because she'll do something criminal or whatever.  She goes to a day program during the day.
After she confessed to some of her "incidents" that got her 51/50'd, I started locking my bedroom door. Being so out of it in jail you are eating a bible and throwing it up thinking you are in hell, thats pretty out there. Her description was unbelievable.  I suspect she is close to being schizophrenic as those episodes equate to such... but I haven't seen her converse with herself, but it is similarly dangerous imho.

We hide the knives leaving them in the bedroom. I stay awake until midnight usually surfing the web, chopping up veges for my dinner the following night. For some reason, I don't feel comfortable sleeping until I know she is totally asleep. I do exercises for my back or sometimes stay up and watch her Cable Tv in the living room. Brush and floss really well, put on face mask,  bleach my teeth, dying my hair, whatever I would otherwise do at home that takes up wasted time.

I could probably even start a crockpot at 10 am then get up at 6:15 and put it in the car. It would be over half cooked by then. I already buy her food sometimes taking her out to eat when I shouldn't (healthy food) so it would likely be fine to use her electricity. She saves money by me sharing my food each night. I started showering at her house too, more than just quickly rinsing off so I also do my hair at night. It stays good looking and bouncy into the following day. I've also sewn my pants, there is so much at home I used to do that I don't do now. I do it at work so when I am home, I can have free time

I take her to program in the morning but otherwise I get a good 6-7 hrs sleep per night. Sometimes more if i am tired, once i was sick and slept the entire time she did, about 9 hrs. She gave me a sinus infection so we were out like a light. I lock my bedroom door now between 11:30-6:30am to get some R&R. Her doxen sleeps with me at the end of the bed. I don't like it but he loves it and putting him in the cage on the floor makes me feel bad. I also have an ebay store. Since she loves to shop, we go to thrift stores once a week. I often find stuff to sell online so after she goes to bed at 9:30 pm, I list my items. I place a small sheet over the half size fridge and stage the items. Sometimes I list on Amazon too, just depends on what it is. It's nice because i have time to test the electronics too if it is a used item I want to list. She's happy because I buy her some stuff too. Often she picks things that are cheap like VHS we can watch (25 cents) but once in a while, something may cost up to $3 and that;s fine.
 it still works out to about $150 a month just with what we pick up together during shopping.

« Last Edit: December 05, 2015, 11:37:21 PM by Outdoorsygal »

Pookie

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Re: For those of you who are younger than 50, what are you doing for cash flow?
« Reply #11 on: December 10, 2015, 05:58:16 AM »
Rental properties.

freeatlast

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Re: For those of you who are younger than 50, what are you doing for cash flow?
« Reply #12 on: December 10, 2015, 12:54:13 PM »
Yep - rental properties too.

Ozstache

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Re: For those of you who are younger than 50, what are you doing for cash flow?
« Reply #13 on: December 10, 2015, 06:33:58 PM »
My military pension, paid bi-weekly, easily covers our annual expenses.

rtrnow

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Re: For those of you who are younger than 50, what are you doing for cash flow?
« Reply #14 on: December 11, 2015, 06:52:08 AM »
I'm about 1.5 years into ER. My plan was to use cash savings for at least the first year. So far little side gigs have just shown up that have basically covered expenses. I'm starting ROTH conversions this year and already have plenty in ROTH contributions to last several years if needed. I too have a rental property that covers about a 1/3 of my monthly income.

DoNorth

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Re: For those of you who are younger than 50, what are you doing for cash flow?
« Reply #15 on: December 15, 2015, 08:32:43 PM »
military pension and part time work at a non profit.

John74

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Re: For those of you who are younger than 50, what are you doing for cash flow?
« Reply #16 on: December 31, 2015, 12:10:27 PM »
Dividends and interests, mostly, supplemented by cash savings as needed.

nawhite

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What we need to know is what percentage is locked in a 401k, what's in an IRA (and is it a ROTH or traditional) and what is in a standard investment account. What your expenses are would help too. For instance if you have $1MM and only 400k is locked in 401k or traditional IRA, then you can have the dividends from the investment account set to auto deposit in your checking account every quarter and then set up an SEPP on the 401k/IRA for the rest.

But if you have 100% in a 401k, then things get more complicated with ROTH pipelines etc.

Nickels Dimes Quarters

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Re: For those of you who are younger than 50, what are you doing for cash flow?
« Reply #18 on: February 13, 2016, 08:06:09 PM »
Thanks for the question. This has been a great read and I learned something today.

NDQ