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Why Work / How long will it last


TrapperBob

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Been looking and reading for a couple of years as we try to get ready for the full time RV lifestyle. I plan to retire in two years and will use the money from the house to buy an RV and live for the first two years without touching savings. We have been RVing for 30 years and have a pretty good feeling on what we want. I know everybody's situation is different on what they need to get by so the question is not can i live on what is shown on the file but is the file calculating correctly?? Need help from people that are good with excel to review attached file and give me suggestions on any errors or omissions. Will the listed money earning 2% really last this long? thanks for the feedback.

 

 

I have file as excel but had to upload as pdf. still looking for thoughts. Error was found so below reflects changes from original post. Now the earnings were adjusted to 4% and the living expense number was reduced so savings would last for 20 years.

 

 

Bob

WhyWork2.pdf

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"MURPHY SAYS." "Everything MUST cost twice as much as what you plan."

 

We work (Volunteer) because--

1. Why pay for a campsite while seeing the territory?

2. It give my DW someone to talk to besides ME. We park host, and I tell our campers that my DW, being a former school teacher, has 200,000 words/day to say. Please help me listen to them!

3. It saves us $ 300---400 per month in campground fees. We can help out our grand kids (and kids) with part of that.

4. At many parks, it saves us $ 10--20 per week in laundry money. THAT adds up!

 

There are many more reasons, but, HEY. You get the drift. Did I say, it gives my DW someone else to talk to??

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Is the principal amount in an IRA or 401K so that all of the withdrawal will be taxed, or is it in post-tax accounts where only the income will be taxed and not the amount withdrawn from principal? Really with $500K you should be able to just live on the income and the SS and not have to withdraw principal unless you really want to - assuming you put it in better earning funds.

 

Barb

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The 2% was so I could be veryYYYY conservative in future earnings. Need to convince my DW that the time to go is coming and there really is no need to continue working. In my excel sheet the yellow areas can be changed to show what ifs.

I've known many people that can't agree between each other that RV'ng is right for them. When you said you needed to "convince" your DW that the time is coming, it kind of set off alarms for me. Two years from now she may have other reasons to keep working. I hope I'm wrong but the RV lifestyle is not for everyone. RV'ng for 30 yrs. on vacations & holidays may not be the same as fulltiming with out your house to return to. I guess only you & her will know if you can take the plunge. Best of luck, Dave.

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All income will be taxed when withdrawn in the year taken money is in 401k and taxable profit sharing accounts. My earnings have also far exceeded the 2% in the file, just wanting to present worst case view when looking at numbers so we know we will be able to cover/recover from unforeseen events.

 

The convince is not the full time life we are in agreement in the plan she is more worried about how long the savings will last and that the added increase in retirement funds are needed. The start date is what we are firming up.

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If memory serves which it doesn't so much these days there is someone on the forum that had this issue in rerverse being the husband that got tired of fulltimeing after a year or two and they were able to come to some arrangement where she could still go.Maybe she will see this and chime in. One of my daughters likes to travel a good bit (not rving) and her husband doesn't really care to most of the time. They have come to some arrangement that works for them. I would say there could be problems but I guess that could happen for a lot of other reasons.

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When I did my initial analysis on our money I calculated 5% earnings and a 4% withdrawal rate. We are in our 5th year of full timing and are doing fine taking the 4% amount. Our earnings are on track and our principle has gone up some. We take quarterly distributions. It has taken a while to get comfortable withdrawing funds and seeing the results over the years. So far, So good!

 

You might consider using 5% earnings and 4% withdrawal and rerun your spreadsheet. This way you can show your DW the worst case and the typical case. I say typical as these are the numbers that a lot of the financial consultants recommended to us.

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I am no math genius so I will not comment on that, however when you said: "We have been RVing for 30 years and have a pretty good feeling on what we want." You might be way off there. Just be ready. .

 

After nine years of full timing, my wife and I laugh like maniacs when talking about just how cocksure we were we started this journey! We had weekend and vacation camped for 30 years also, and thought we knew about everything . Wrong. Very wrong.

 

Full timing is always evolving and changing. (Probably because you can easily adjust your lifestyle to fit what you desire.)

 

It is still the best lifestyle on this earth, just be ready for change.

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The 'how much' question is a bit like 'how long's a piece of string' question.

Every time I had doubts I looked around at some of those living full time in 'old', really "old", RVs and said if they can do it so can we.

 

The answer is always 'it depends'. No two of us are the same. Anyone who 'really' wants to do will find a way to make it happen. I haven't downloaded the excel file. Simply because given any set of figures I can make them tell me what I want to hear.

 

regards

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The how much $$ saved and how long will it last is an ongoing discussion with everyone I think.

Right now we are having the discussion about either to finance 1/2 the cost of a MH vs paying cash.

Still up in the air about all this. We plan on keeping our house and just traveling part time.

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Your numbers are clearly very conservative in the income side but also generous with the income tax side as I can't imagine you having to pay out 25% of your income and particularly so for social security.

 

There is one item that I don't see so will suggest that you should have in your plans, if you do not. have some sort of exit plan in your budget it would be wise to address it. I can tell you from experience that the time often arrives before the time when it was expected and sometimes with little warning. Where we made our biggest mistake was that we did as your plan shows and used the funds from the sale of the house and preserved all of our tax sheltered money. But the economy slowed and so the income from invested funds shrank and did not increase nearly rapidly enough to outstrip the income tax that we had to pay on our large withdrawal for the purchase of our home-base. We were able to split the expense over two years due to buying just at the end of a year, but even then it inflated our annual adjusted gross income such that we were required to pay tax on 85% of our SS, which is the maximum.

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We retired at age 58, moved aboard our boat and never looked back. We decided to take SS early at 62. We paid for our health insurance until we hit 66. Thank God for Medicare! We are not wealthy people but we planned out what we wanted to do and figured out what is important to us. We now split our time between the boat and the MH.

 

The takeaway is this:

1) I think you are high at 25% tax rate.

2) you are being way too conservative at 2%. Good, safe mutual funds will yield four times that.

3) the rule of thumb I've always heard is 4% withdrawal rate.

4) if the economy is rocking along, you can afford to spend a bit more. In downturns, get conservative. An acquaintance checks the market every day to see if it's safe to order desert!

5) on fact remains... it will cost you everything you are willing to spend.

 

How long will,we do this? Who knows. Things change over time.

And time is a thief.

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We started with somewhat less than your spread sheet shows. We have to wait another year before my DW starts collecting SS. We both have small to med pensions (total around $900/month) so that our monthly income for now is just under $3000. We were able to purchase a lot at a very nice RV Resort in Florida for wintering, and we seem quite comfortable in our life style. We have not yet begun a steady withdrawal from our pre-tax investment portfolio. I also believe your 2% is way too conservative. We get a net of almost 6% being very conservative with our investments.

 

So I guess from our perspective, you have plenty to FT!

 

We do plan to volunteer for campsites during the summer travel months. We have plans to camp host in the west this year. Of course diesel and gas cost this year will help.

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Just want to say thanks for the feedback.

 

My plan is to have three years living expenses in cash so I do not have to over think taking funds out of the market. If the market is good to me I will replenish my funds but if not I can skip a year and wait it out. Having gone through several market down turns I want the ability to let it recover and seldom is a down turn three years long. My opinion the worst thing you can do is withdraw from the market after a big downward adjustment. That being said the hardest thing to do is leave it where it is.

 

When we start this I know it will not be full timing forever but i am not sure I ever want to own another home. Based on my numbers if we quit in 5, 10, or 15 years I believe the funds will be there for us to go back to the old ways condo or home, rent or buy.

 

Keep the comments coming

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I've known many people that can't agree between each other that RV'ng is right for them. When you said you needed to "convince" your DW that the time is coming, it kind of set off alarms for me. Two years from now she may have other reasons to keep working. I hope I'm wrong but the RV lifestyle is not for everyone. RV'ng for 30 yrs. on vacations & holidays may not be the same as fulltiming with out your house to return to. I guess only you & her will know if you can take the plunge. Best of luck, Dave.

I've known many people that can't agree between each other that RV'ng is right for them. When you said you needed to "convince" your DW that the time is coming, it kind of set off alarms for me. Two years from now she may have other reasons to keep working. I hope I'm wrong but the RV lifestyle is not for everyone. RV'ng for 30 yrs. on vacations & holidays may not be the same as fulltiming with out your house to return to. I guess only you & her will know if you can take the plunge. Best of luck, Dave.

Excellent post and good advise.

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A comment on taking from your investments for everyday living....

 

If you feel you are "close" to only having just enough money and you plan on a 4% withdrawal rate you will run into issues if you have investments that are not steady state returns....like annuities. The reason, as I think you note, is that withdrawing money in a period of downturn - which can last for several years - really has a negative effect on your total returns. And if you are already "close to the edge" it can really be painful. So you have to have a buffer to account for that. Three years cash may be that buffer, but I'd want the investments to be "above" that, and to not include that. Thus, I'd calculate a pot of cash for three years, PLUS adequate investments for what I thought my needs might be over the longer term.

 

We have done something similar for the last 15 years. During good times I take enough profits to replenish the "pool" - it gets us through the bad times where selling something would affect the overall portfolio performance. It is akin to "dollar cost averaging"...I call it "fun-cost averaging".

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Just want to say an error was found in the pdf/excel logic and it has been fixed in original post. I then had to adjust the amount taken out every year for living expense so listed funds would last 20 years. The earnings on remaining funds was also upped to 4% from the original 2%. When I put in my actual earning for past ten years my funds will go out to the 30 years I am shooting for, but was hoping to make it with more conservative numbers.

 

Again thanks for the feed back and help in getting my file fine tuned.

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Another option to reduce damage to your plans from market moves is a variety of investments you can draw from, when stocks are down sell CDs or bonds for your needed cash, when stocks are up sell stocks. Re-balance when it makes sense.

 

I agree. A three plus year of non-volatile liquid assets are a good idea. If the ACA is still available you maybe able to reduce medical insurance costs. I plan on minimizing my income and maximizing the medical tax credit until I am 65. I will use cash to supplement my income. If you show 36k in income a couple at the age of 60 qualifies for a 10k tax credit for healthcare insurance costs. The surpreme court will make a ruling in June with respect to these tax credits for states that did not setup a health exchange. So Texas may not qualify at that point.

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