ORIGINAL POST BELOWdenovo wrote: ↑Sat Sep 22, 2018 10:37 pmI feel like we need more info,
what's your household income from employment, No longer employed, 72t / Roth ladder starting this December
value of all assets:Net Worth $3.1M ($2.25M 401k, $500k primary res, $380k rental, personal property $90k, total debt $148k,
rental cash flow, Flows $15k annually.
savings rate...Starting decumulation phase
Retirement ages desired for you and spouseNow, 52 & 50
Kids you need to pay for education?No
Hello to all,
I am very perplexed by this situation and I could really use some opinions. This post is a bit lengthy but I will try my best to bring things full circle at the end.
I have adequate 401k dollars but I would really like to have a larger post tax account heading into retirement. I do have a rental property valued at approximately $380k I could either sell or refi to generate cash. The goal would be to consolidate debt (refi), or eliminate debt with sales proceeds. This property is a product of a 1031 exchange that started 12 years ago. If I do sell fed & state taxes will be about $46k including recapturing depreciation according to my CPA. I would have to pay off a $120k note as well.
I plan on doing a 72t distribution starting this December. A roth conversion ladder has been suggested as a alternative so I am weighing that.
Here is a look at the debt I am looking to restructure or cash out.
Rental note: Bal $120,000 @ 4% fixed 29 yrs. left on loan $600 pmt (P+I)
Auto loan; Bal $7600 @ 2.9% 1.5 yrs. left on loan $373 pmt
RV loan: Bal $15,500 @3.75% 6 yrs. left on loan $227 pmt
Furniture loan: Bal $5300 @ 0% 4 yrs. left on loan $88 pmt
A unknown expense on the horizon.
City is talking about making us convert from septic to city sewer. Expense: about $25k
Our primary residence is going to need a new roof in 2 years or less. Roofing contractor was out yesterday should have bids flowing in next week.
I need to get a HVAC tech out to the primary res. for a furnace assessment. Seems like it would need replacing earlier than 10 years.
The rest of our primary res. has recently been gutted and renovated including new windows so I feel like I am covered there.
I have run several budget scenarios which are summarized below.
Refi Rental: New note balance on rental 30yr fixed @ 5.375 $200k. Payoff all debt listed above including the proposed sewer conversion and $30k cash leaves me with a balance of about $66k (which includes the Dec. 72t distribution less taxes)likely to be put in CDs. Spending budget wise I would need about $4k mo net living expenses. Add another $10k in taxes brings me in at $58k. The rental still flows appx $2.5k annually so 72t would be about $55k or 2.4% WR. A 25% market drawdown on 401k balance would bring me in at 3.3% WR. Since I am under the ACA Cliff. Healthcare premiums in budget are reduced in this scenario.
No refi: leave all debt the way it currently is. Leaves 30k cash. Rental prop flows $8400 net. Pull $73k from 401k to cover living expenses and taxes. Gross income would be about $82k. Since over ACA cliff I added $12k to budget for increase in insurance premiums. 72t draw is 3.3% WR. 25% drawdown 4.47% WR
Sell Rental and cash out all debt. Also allows for $25k sewer and $30k cash. Dec 72t distribution included leaves me with a cash balance of $170k which I could put into CDs @ 2.5% which would throw off $4k in interest. Budget needs are $48k annually net. Add 10k in taxes + CD income brings me in at $57k Gross. Under ACA cliff so premium reduction in budget. That brings 401k draw in at 2.6% WR. 25% drawdown 3.45% WR
I have no problem being a landlord but would like to be out of the business by age 60 anyway (8 years)
Rental property fails the 1% rule coming in at .56%
If you have made it this far my thanks. If you need clarification just ask and I will try to provide more information.