Hi,
Thank you for the advice, is there a tool you'd recommend I use in this complicated financial situation involving rentals to determine how long until I can FIRE?
Per your advice, I updated the fields for rental income, expenses (including loan interest), and depreciation. I then cleared out all the rental properties under the loans section rows 133 to 137.
I reviewed the stash needed(B194) to see if it uses the rental income and it does not significantly change based on different income from rentals. I followed the calculations, I can see rental income is not taken into account, the rental income is only used to calculate the projected stash size so it assumes once you retire, you stop earning all rental income(and it assumes no rental expenses during retirement too). I intend to keep my rentals into retirement. Reviewing it further, I realized the RE Total annual expenses exclude all loans(rental + primary)!
To ensure my rental income and expenses are properly used in the retired section, I tried:
-Added to "Extra income after RE"(B166) with my "Rental taxable income" in D36
-"Change in spending after RE"(B187), I added my primary residence annual expense(D76) AND the rental's principal payment(D56) but I then subtracted out the rental depreciation (D35) because while the depreciation is tax deductible, that is cash in my pocket I can use against expenses.
-Changed "Taxable income"(L168) to include my Extra income after RE(B166)
-Reduced "Rental equity" in B175 to $0
With these changes, does that sound correct? The calculated Stash needed still seems high just to generate an additional ~$29K income per year, I'd of expected around $800k, not $1.3M...
Its still not perfect because Rental Depreciation will disappear at some point but also the loan interest will decrease and principal portion increase until paid off affecting my taxable income but I'm not sure how to properly model that with this tool or if its important for FIRE.
Here is the snippet for the retire section(or refer to google link):
Time to FI?: | | | |
Extra income after RE (pension, SS, etc.) | $56486 | /year =D36+N("Rental taxable income") | |
Guess at time to FI | 4. | years | |
Safe Withdrawal Rate | 4.00% | percent | |
Real return on tax-deferred investments | 5.00% | percent | |
Real, after tax, return on taxable investments | 4.25% | percent | |
|
Current Savings | | | |
Taxable stocks & bonds | $105,000 | | |
Tax-deferred (e.g. trad. IRA/401k) | $415,000 | | |
Roth + HSA | $55,000 | | |
Projected Savings at Retirement | | | |
Taxable | $617,950 | | |
Tax-deferred (e.g. trad. IRA/401k) | $634,773 | | |
Roth + HSA | $97,455 | | |
Total projected stash | $1,350,178 | | |
| | | |
Projected Expenses in Retirement | | | |
Non-loan, non-work expenses | $57,031 | | |
Change in spending after RE | $19,283 | D76+D56-D35-(806*12)+N("806 is rental portion of my primary residence which is duplex, covered in rental portion") | |
Annual non-tax retirement expense | $76,314 | | |
Income taxes | $8,663 | | |
Total | $84,977 | | |
Total loan principal due at FI | $561,601 | | |
| | | |
Stash needed for retirement @4.0% SWR | $1,273,880 | | |
| Have $76,298 extra. | | |