Retirement plan-half timing

[ToddF]

Recognizing the risk of premature death or chronic illness, no one can rule out either one entirely, We are taking the lead from threads here on death risk and fulltimer lifestyles as something very attractive.

We will keep S+B and spend 4-6 months each in RV and townhome.

Debt free at 62.

SS at 62

Budget padded and adj for inflation. Inc health insurance and out of pocket.

No pensions.

Savings invested in Roth, Muni Funds, Trad/Tax Def Plans. 80% CD, US Treasury, St Bond. 20%Stock/Bal Fund.

Expected rate of return (average) 2.8% for 5 years, then bumped up to 3.3%.(rising rate environment).

No income tax from 62 on after sale of business, office building ,and 2nd home.

No kids. 11 nieces and nephews all lined up to inherit big bucks from parents and grandparents.

Mental adjustment to taking SS early (big cut) and spending down assets currently in progress.

Want to spend more time RVing and snowbirding.

S+B ideal, paid for, updated, HOA minimal maintenance. Lock up and go. Neighbor brings in mail. Simplisafe monitor from phone Inc temp.

July 1 2023 target early retirement date.

We have been self employed, no pensions. Healthcare (assuming they don't change it) is factored into existing programs.

Can't see any reason to keep working after 62. Getting sick of doing taxes (30 years).

 

Household budget will be 6K monthly. No income tax, that is one of the goals ...not pay income and SE taxes anymore. Have been paying big income + SE taxes for many years.

There is hope for the self-employed!

 

 

Edited August 15, 2018 by ToddF
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[rpsinc]

Nicely laid out Todd.  

[rpsinc]

I appreciate that you are providing hope for the SE.  

[Kirk W]

3 hours ago, ToddF said:

There is hope for the self-employed!

You seem to have planned well and I salute you! Preplanning is needed for successful early retirement for most of us no matter how we have been employed. Your example is a good one for those who follow. I can't imagine why you would not be successful. 

[momdoc]

I like  your planning.  Very similar to our situation.  Love the retired life!

[FL-JOE]

Sounds like a good plan to me.  If you get tired of paying real estate taxes, utilities, and other expenses on the sticknbrick while it is sitting empty then you can always sell it.  Good luck and safe travels!

[richfaa]

We have been doing much the same thing since 2006. We call it long timing. We spend 6 months of the year in a warmer climate and use the S&B for our base the other 6 months travelling when we feel like it. We kept the S&B because it is paid for and is the only investment  we have that increases in value. We do pay Ohio State tax and property tax but it is well affordable. We figured one day we will not be able to do this and we have to settle somewhere. We like the area we have the S &B and it is here for us when we will need it full time. 

[ToddF]

In my tax practice of 30 years I deal primarily with individuals. I can state unequivically that the single biggest surprise in retirement is the unexpected death of a spouse/ partner or self. "Early " retirement at 62 (or sooner) really makes sense in this context if one can afford it. Determining whether or not it is doable takes a fair amount of analysis but worth the effort. My biggest fear is working until 67 and kicking the bucket before 70.

Appreciate words of encouragement here. 

[sandsys]

2 hours ago, ToddF said:

My biggest fear is working until 67 and kicking the bucket before 70.

Appreciate words of encouragement here. 

Dave retired at 60. (I was already retired.) We are 71 now so it must have been a good decision.

Linda

[FL-JOE]

I retired at 58 and worked as a residential contractor for 3 years before fully retiring.  The DW retired in between there and we never regretted it.  My goal is to draw a pension for as many years as I worked.

[Kirk W]

11 hours ago, ToddF said:

My biggest fear is working until 67 and kicking the bucket before 70.

I consider this to be something that too many people fail to consider. I knew someone who did exactly that.

Part of what kept me with the same employer for my entire career after the Navy was the excellent early retirement plan which they had. Because of that, we were able to retire when I was 57 and even though I could have increased the amount of my pension if I had stayed a few more years, I am so happy now that we took our earliest possible retirement date! We managed almost 12 years on the road and have now been part-time for another 7 years and we are so glad that we left as early as possible. I did not work even 1 day beyond my earliest retirement date! 

[KnoxSwift]

I have the same plan but 2025.

Good luck to you. Sounds to me you are planning ahead. 

Goal are good!

[Captain Happy]

Live for today, because tomorrow may never come.

[ToddF]

40 minutes ago, Captain Happy said:

Live for today, because tomorrow may never come.

Or, live for today and save for tomorrow since there is a good chance tomorrow will come. 🤗

[rpsinc]

5 minutes ago, ToddF said:

Or, live for today and save for tomorrow since there is a good chance tomorrow will come. 🤗

Or find something in between that can work for you.  I just visited with a dear friend who is in the seemingly best health at 79.  All his screening results come back each year just great, but last week, he experienced a mini stroke due to 79 year of plaque, common for all of us, and now he realizes that he needs to change his lifestyle a bit.  He isnt going to sit on the couch and RELAX,  just allow others to help him with things he has typically done himself.  Certainly a lesson for me but I am only 60, although learning new things is a life long pursuit.  Glad to be able to learn from those here too.

[JimK]

You have put forth your plan.  I don't know if you are looking for validation and approval or advice.  I cannot give validation or approval for your plan and I know hardly anyone follows any advice.  I will just tell you how I handled retirement on a limited budget and how it worked out.

When I approached retirement, I calculated I would need to work to about age 70 to afford to live in my high cost of living area, Long Island, NY.  We downsized and put the house on the market.  When the house sold, I resigned and we set out full time in a small RV.  Expenses were very low.  Fuel costs were about what I had previously spent commuting to work.  Utilities dropped to under $10 per month for propane.  We spent most of our time in National Parks, national forests and the great scenic areas of the country.  Camping averaged $7/night.  Even food costs dropped since we ate much simpler, quicker cooking meals.  After 2 years, my wife got a strong itch in the way of grandkids and wanted to return to Long Island.  By that point our investments and very low expenses had given us the money.  We returned, bought a house.  We did remodeling including partitioning the house and adding a second kitchen.  We own the house but my daughter and her family occupy the other half and the rent they used to pay goes into paying the mortgage, taxes and utilities.  They are also built in house sitters while we travel a few months a year.  As for being debt free, I mentioned a mortgage.  We did not need the mortgage to pay for the house but with rates well below 4%, we took the maximum mortgage the bank would allow, $330K, and maintained that amount in our portfolio rather than tying it up in the house.  After 5 years, the $330K investment has covered the cost of the mortgage and we are ahead by $100K.  In the 10 years of preparation and retirement, my portfolio has grown by 3 1/2 times.  All of my investments have been relatively conservative with about a 60:40 stock:other allocation.  Most is in mutual funds managed by Fidelity and by TIAA.  Sure the stock market goes up and down and often has major corrections.  Even so over the long haul a 60:40 allocation returns about 7% annually on top of inflation.

Again, I doubt you want advice, but if you are willing to listen, learn something about investing and financial management.  Then find a trustworthy investment house and let them manage your money with an allocation that makes sense for your situation.   

[ToddF]

It sounds like most of your l gains occurred between 2008-2018. (There is no historical precedent for this period economically). I have jumped into many an investment and rode out periods of loss and decline. I could retire yesterday if 9-10% returns were assured (before taking into account inflation)...they aren't. 

No idea what future returns will look like, but the future is unlikely to look like a repeat of '08-18. The next 10-15 years are the most critical for a pre-retiree or young retiree in their late 50s now. One reaches a point in their late 70's (if they are still alive) where gains are on paper for the next generation.

Periods of grueling negative investment returns are very difficult to go through. Don't you remember the 70's?

Todd

 

[JimK]

A 7% gain on top of inflation is the average over decades and decades of analysis.  Sure the results can vary considerably over the period of a few years.  I am planning for a retirement that lasts decades.  That is not unreasonable.  For a couple aged about 65 there is about a 50% chance that one will live into their 90s. 

When it comes to investing, people always remember the bad times and give those times way more importance than they deserve.  In the lifetime of most of us, there have only been a couple of major setbacks:  the dotcom bust of 2000 and the great depression of 2008.  I was not day trading or speculating during the dotcom growth spurt.  I had most of my savings in more conservative funds and the drop was not too bad.  I did see a major drop in 2008 as did everyone else.  Many people did the worst possible thing and sold at the bottom of the market.  For others who did nothing, they were whole again within 2 years.  I worked with an advisor, made even better choices and was whole again in about 18 months. 

Firecalc (just google it) is a great tool for seeing what can happen in the best and worst of cases.  Firecalc shows that a portfolio of about 50% stocks will almost always cover a 4% safe withdrawal rate. 

As to my returns.  I stated a 3 1/2 fold increase since 2008.  If I look at the time period before the 2008 crash, I am at about 3 times.  If I look from the absolute bottom at the end of 2008 until now I cannot even remember the change, maybe 6 fold.  Anyway day traders try to capture increases on a daily basis.  Other speculators may be looking at changes over weeks or months.  I am an investor.  I am interested in what happens over years and years.  Those of us planning for a long retirement need to think about at least 2-3 decades.

Edited October 20, 2018 by JimK

[sandsys]

We hit the road in 2008 and our savings immediately took a huge hit. But, we were able to wait it out and we are in better shape now than ever before. What goes down must come up?

Linda

[ToddF]

Back to my original post... 

It is possible to retire early. (This was the main thrust of my original post - not a focus on investment strategies).

It is possible to plan a secure retirement without reliance on the stock market. Even with our conservatively positioned and modest portfolio, our funds don't run out (ever). (This runs contrary to what Wall Street would like you to believe). 

The unprecedented move to zero interest rates will unravel (process currently in play). Again, no idea of the extent to which gains will unwind etc. 1,300 point swing in the DOW last week and wide moves in 10 year T bill rate are reminders of what can happen. Sometimes the recovery happens too late . I like to cite the Japanese Nikkei currently at 22,532. (It topped at 39,000 in 1989). It's anecdotal but a point worth pondering. US and Japan are 2 of largest economies. Japan's rates dropped to zero long before ours and everyone said it could never happen here.

As to advisors, most under perform (hence the boom in indexing) the market and many got flushed out in the aftermath of '08. Financial services firms bring in new blood (kids in their 20's) at Dow 6,000 and restart the cycle. 

Heading out tomorrow for a 9 week tour of warmer places! Life is good!

 

Todd in Minnesota - temps dropping like  a rock!

 

 

[ToddF]

1 hour ago, sandsys said:

We hit the road in 2008 and our savings immediately took a huge hit. But, we were able to wait it out and we are in better shape now than ever before. What goes down must come up?

Linda

In Japan too? (Nikkei 39,000 in 1989 and 23,000 now).

[sandsys]

2 hours ago, ToddF said:

It is possible to plan a secure retirement without reliance on the stock market.

Todd in Minnesota - temps dropping like  a rock!

Why would you want to do that? Most of us plan to live for decades after retirement so why not set up a portfolio that reflects that?

Temps dropping? High 55° tomorrow and 51° next Wednesday and sunny all the way through?

Linda

[JimK]

The average American knows almost nothing about personal finance and the results speak to that.  The average credit card debt is huge.  The amount that most people have to see them through retirement is often zero to very little.  People will rush to pay off a mortgage, tying up all their money, when they don't even have an emergency fund or the resources to maintain the house.  Sadly, despite knowing almost nothing and living with a bunch of mythical beliefs, they want to continue to be their own doctors.  It is sad because there are plenty of trustworthy financial institutions which will provide free or low cost advising.  It is sad because the outcome of doing it yourself is almost always horrible.

[justRich]

If the home is paid for and one intends to keep it, it might be worthing look at a reverse mortgage.
The reverse mortgage could pay the maintenance, landscaping and property taxes.
Careful structuring of the RM and tax planning might let one have their cake and eat it too.

 

[ToddF]

Plan update...we sold our 2nd home 2 weeks ago and banked quite a bit of cash furthering our plans to fully retire at 62. (58/60 now).

Reverse mortgages are a good option for those in their late 60's or beyond (my opinion) with no other options. In our case, we are unlikely to ever have to tap the equity in our primary residence which is paid off.

Owning 2 homes and an RV became too much of  a stretch on many fronts.  Financial, maintenance, general hassles of trying to keep everything straight. Got a taste of the freedom many who go full time talk about in terms of getting rid of unwanted and underused possessions, streamlining affairs etc. It is absolutely wonderful! 

Our primary residence is a town home - very little outside maintenance. We can lock up and go anytime for as long as we like.

One of the lessons we are learning pre-retirement is that we like our home base in MN and don't want to relocate or go FT. 

Our general theme is to simplify and streamline. Seems obvious but boy do we see some doozies...

 

Edited July 16, 2019 by ToddF