The accountant says we can retire early. Woohoo!!!

[Tpondel]

In all seriousness, after 45 years of hitting the floor running 7 days a week, I find that I feel terribly guilty on those days when I'm not actively working to get some project done.

Today it's raining out and not a lot of real work to do inside...sometimes it's difficult to just "be retired"...

My dad once said “the problem with retirement is you never get a day off”

 

[gsganzer]

I think you mis-understood...your accountant said HE/SHE can retire early

I do have a disdain for many of the money investment folks. Every one of them just badmouths everyone else's performance and will tell you how they can outperform everybody else. They're really just after asset capture so they can then get a flat rate of 1% or so on your value, plus whatever buried fee's, regardless of how the assets actually perform.

I would like to see our politicians pass a law requiring standardization of investment reports, that clearly spell out what you have paid to the investment company each month. Similar to what Obama required for credit card statements.

Lawyers have their own issues. There's absolutely no incentive for them to efficiently resolve anything and I often see opposing lawyers collude to play a self-perpetuating game to drag things out to pad both their pockets.

 

[CloverKnollFarms]

My uncle told me last month....

"Rob, when you retire, you'll wonder how the hell you ever fit a job into your busy schedule".

He was right. I don't have time to have a job. Before I retired I thought I may get a part time job... Because I'd be bored.

It's been a month, and I cannot fathom working for someone else ever again. My workplace is my shop. I punch in when I want to.

We have never had a financial planner... But over two decades averaged 12%+ over our investment portfolio. The key for us has likely moreso been living debt free and well below our means. Most years we were saving 50-70% of our income.

 

[mikester]

I do have a disdain for many of the money investment folks. Every one of them just badmouths everyone else's performance and will tell you how they can outperform everybody else. They're really just after asset capture so they can then get a flat rate of 1% or so on your value, plus whatever buried fee's, regardless of how the assets actually perform.

I would like to see our politicians pass a law requiring standardization of investment reports, that clearly spell out what you have paid to the investment company each month. Similar to what Obama required for credit card statements.

Lawyers have their own issues. There's absolutely no incentive for them to efficiently resolve anything and I often see opposing lawyers collude to play a self-perpetuating game to drag things out to pad both their pockets.

I'm glad my kids are all grown up and independent...Right now I only have to work to support accountants, insurers, lawyers and politicians...

 

[gsganzer]

The key for us has likely moreso been living debt free and well below our means. Most years we were saving 50-70% of our income.

I think this is the thing that's lost on most people. Having the ability to show restraint in your spending. There's a difference between having money and being wealthy.

 

[CloverKnollFarms]

I think this is the thing that's lost on most people. Having the ability to show restraint in your spending. There's a difference between having money and being wealthy.

Also, when you show restraint, you don't need to save nearly as much to retire. It lets you save more, earlier, and live longer on what you saved. Double win.

We really have no intention of touching the principle until RMDs become an issue. It feels really unnatural to be retired at 47... But also, we have lived really unnatural lives for 20 years in the lead up.

My son still has to head to college, but 15 years ago we started that saving as well, so he has a six figure nest egg there too. It's his job to spend it wisely, because his dear parents did their part. Now it's time for him to show responsibility.

 

[ultrarunner]

One of my most senior friends posed the question should you retire because you can?

He believes retirement is a death sentence.

He is 86, good health and running the company he built for 60 years.

Says there is no other place he would rather be.

I wonder how much of his satisfaction is because he is the boss…?

 

[Rustyiron]

I know people who just really don't know how to be themselves and have difficulty with retirement. They (were) are their job and without it they just kinda wander. Very sad in my mind.
Not in ultrarunner's case above, but if you're working for someone....

 

[npalen]

So what is the reason(s) for switching a 401K to an IRA at retirement or even years later? Both require RMD's, right?

 

[ultrarunner]

IRA has more options for investment is my understanding.

401k and 403b are limited to what the employer offers.

 

[ArlyA]

I retired in the spring and now my spouse is talking about it. I tried to do more work but inflammation in my wrist didn't appreciate that. What to do, what to do.

 

[dodge man]

In our case both out 401k’s were from where we worked, we pretty much had to take it out and roll it into something else.

 

[CloverKnollFarms]

You can leave your 401k with the old employer plan as long as you like. Unless it's something unconventional. IRAs would have more investment options however.

Retirement to me isn't sitting on my ass doing nothing. It's not being beholden to someone else dictating my days, hours, and minutes. Some days I awaken at 6am... Some days at 8am. Some days I work 5 hours in the shop, some days 2... And spend time on the apiary. I may have 5 lawncare clients, I may expand to 20. I choose.

 

[RSKY]

So what is the reason(s) for switching a 401K to an IRA at retirement or even years later? Both require RMD's, right?

The biggest differences as it was explained to me by my Fidelity advisor were two. The first being the range of investments available. In my Fidelity account I have over 9,000 mutual funds to choose from. Plus CDs, bonds, or to let it sit in a money market account. In the 401K I had, if I remember correctly, eight choices. The second difference was that if I set up a withdrawal of a certain amount a month that I could never change that until the RMD law kicked in. I haven't taken anything out of my main IRA since I started drawing Social Security. If I need cash I take it out of the non-IRA investment accounts set up after we sold our inherited farms/houses. Laws may have changed in the thirteen years since I retired at three days shy of 57.

The 401K that I had with Fidelity was rolled over into an IRA that they manage for me. It is invested conservatively. My other Fidelity account is invested about 1/4 in CDs and 3/4 in higher earning but riskier mutual funds.

I have also spun off five smaller accounts that are still in my name but the survivors are my grandkids. They are invested in a higher risk but much higher earning mutual fund. They know nothing of these and will not get them until I am gone or they have a life and death emergency. If they don't touch these and the economy doesn't completely collapse they will have a huge nest egg when they retire.

 

[Snobdds]

I turned 58 in July and my wife turned 55. We both worked hard all our lives and maximized our savings and investments. One kid is still in college, but we have her education fully funded. So, we finally sat down with a fiduciary to discuss our financial position and our retirement goals. I expected it to be the case, but he officially told us we can quit the daily grind.

As we start to disengage from the rat race, we'll start trying to finalize our plans for a retirement home/property and get that ball rolling.

I don't expect me to quit working outright, but I'll start getting choosier on the jobs I take in the coming year or so.

How are getting around the IRS rule of 59 1/2 to avoid paying an extra 10% penalty on retirement funds withdrawal?

Due to this rule, I have began to stack non retirement funds in assets that can be drawn upon prior to 59 1/2 to avoid this penalty. I have a lot of rental propeties that will act like an substitute income free of any penalties.

 

[Snobdds]

One of the Trade Magazines that I get had a story about the cost of building a house in large subdivisions. They didn't factor in the cost of the land since that varies so much. They did a survey with a bunch of the biggest home builders in the country and the rule of thumb is 1/3 of the cost to build a house is materials. The rest is labor and government fees.

I was talking to the CEO of Toll Brothers one day about some risk management stuff and I asked him...how much does it cost to build a home. He said once the engineering department finalizes the plans, it goes to a team that builds the house but documents every piece material they used. Once that is done it's sent to purchasing to see if materials can be bought in bulk at a discount. He also mentioned that a build on a house that was just designed costs a lot more than a build on a house that the crews have been building for a few years. So a house may cost 100K for the first 10 units, then it drops to 80k for every unit after. So by the time a design has been marketed for more than a year...the cost to build a 4/3 house is about 80k. Then add about that much in labor and that is the wholesale cost of a house. They have about 200k in margin on each house.

He also said that is a way the company can manage economic downturns...just build a bunch of old designs and hold off on doing the new designs until the market bounces back.

It was a very interesting discussion.

 

[CloverKnollFarms]

How are getting around the IRS rule of 59 1/2 to avoid paying an extra 10% penalty on retirement funds withdrawal?

Due to this rule, I have began to stack non retirement funds in assets that can be drawn upon prior to 59 1/2 to avoid this penalty. I have a lot of rental propeties that will act like a substitute income free of any penalties.

We got around the 59-1/2 by placing $500k in a brokerage outside of retirement. That brokerage averages 12%. With the reduction in taxable income, our long term capital gains tax is 0%. The wife is working, and she really enjoys her work, she is only 43. I have some income from my side gigs, and our TOTAL expenses including insurance total about $40k per year. Not likely we will touch the $500k principle at this point… it’s just a buffer and will be added to our retirement savings when I turn 60.

 

[ultrarunner]

I was talking to the CEO of Toll Brothers one day about some risk management stuff and I asked him...how much does it cost to build a home. He said once the engineering department finalizes the plans, it goes to a team that builds the house but documents every piece material they used. Once that is done it's sent to purchasing to see if materials can be bought in bulk at a discount. He also mentioned that a build on a house that was just designed costs a lot more than a build on a house that the crews have been building for a few years. So a house may cost 100K for the first 10 units, then it drops to 80k for every unit after. So by the time a design has been marketed for more than a year...the cost to build a 4/3 house is about 80k. Then add about that much in labor and that is the wholesale cost of a house. They have about 200k in margin on each house.

He also said that is a way the company can manage economic downturns...just build a bunch of old designs and hold off on doing the new designs until the market bounces back.

It was a very interesting discussion.

Very true… a small time upscale builder that never graduated high school but very sharp builds spec homes…

He has 3 designs depending if flat, up slope or down slope so knows his material cost, labor with engineering, etc. all ready done and proven.

He lives in a 3 million home he built and his success is self funded…

Each home is owner builder…

He is a firm believer in education saying without doctors, lawyers and CPAs he would loose most of his buyers.

 

[Snobdds]

We got around the 59-1/2 by placing $500k in a brokerage outside of retirement. That brokerage averages 12%. With the reduction in taxable income, our long term capital gains tax is 0%. The wife is working, and she really enjoys her work, she is only 43. I have some income from my side gigs, and our TOTAL expenses including insurance total about $40k per year. Not likely we will touch the $500k principle at this point… it’s just a buffer and will be added to our retirement savings when I turn 60.

I want to avoid paying a double tax, as I believe this does. You are putting in already taxed dollars, if you do any withdrawals, profit basis are taxed. If you move the money later to say an annuity, that is taxed prior to purchasing due to buying at present value, not future value.

I have not found an investment vehicle that allows for not being taxed twice for that gap between retirement and 59 1/2.

Edit:
Except real estate. You can generate enough expenses to show a loss to cover any profits.

 

[gsganzer]

We got around the 59-1/2 by placing $500k in a brokerage outside of retirement. That brokerage averages 12%. With the reduction in taxable income, our long term capital gains tax is 0%. The wife is working, and she really enjoys her work, she is only 43. I have some income from my side gigs, and our TOTAL expenses including insurance total about $40k per year. Not likely we will touch the $500k principle at this point… it’s just a buffer and will be added to our retirement savings when I turn 60.

We're in a similar boat, not touching our own IRA's or 401K's. However, we do have inherited IRA's that will need to be dispersed within 10 years. We have a fairly complicated tax future.