The ludicrous "you need a $million to retire" mantra financial companies try to tell you.

[Lisa558]

The primary house (condo) isn't sheltered. I think there are ways to protect it....but, not sure.

i still don’t understand what you mean by “sheltered.”

Also, I understand there is no state income tax in FL, so that makes the trade even more of a good deal.

 

[Concerned American]

You mean property tax? The paid-off primary house isn’t sheltered from taxes either.

Yeah, like death, you cannot avoid taxes. The best way is to mitigate them as much as you possibly can. It just becomes "cost of living." We live in a state with no income tax and no tax on food--these are pretty big savings. Roth IRAs are a hedge--you have to pay tax on the principle when you deposit it, but the earnings that it generates are tax exempt. Beats the hell out of renting your residence and making someone else rich. There is no equity for a renter.

 

[Concerned American]

Well, 50 would be great, but people should definitely have the mortgage paid off by retirement.

I do agree that young people - or middle age people, too - need to exercise fiscal discipline. I hear excuses as to why they can’t save after they’ve paid all their bills. Well, then they’re living too high. For example, I knew someone in her 50s with virtually no savings, but she was renting a 2-bedroom because she said a 1-bedroom was too cramped. The responsible thing would have been to go with the 1-bedroom and put the difference toward a retirement fund.

But by 50, she was already behind the 8 ball. Those are things that should be addressed in the 30s.

 

[WorldWatcher]

Thing is that if you sell your condo, and buy at half that in Fl. The other half is not going to be sheltered from taxes.
You need to figure that one out and get some good advice.

Well actually.

There is a tax exemption for the sale of a primary residence of $250,000 on the profit from sale of a home. That doubles to $500,000 if married. (BTW - A widow or widower can still claim the married exception for up to 2 years after the death of a spouse.)

Those exemptions apply to the profit off the sale, not the sale pricec.

WW

 

[Lisa558]

Yeah, like death, you cannot avoid taxes. The best way is to mitigate them as much as you possibly can. It just becomes "cost of living." We live in a state with no income tax and no tax on food--these are pretty big savings. Roth IRAs are a hedge--you have to pay tax on the principle when you deposit it, but the earnings that it generates are tax exempt. Beats the hell out of renting your residence and making someone else rich. There is no equity for a renter.

There’s something to be said for renting in one’s RETIREMENT years, after one has built up equity as a homeowner, to get rid of the headaches of homeownership. But people who rent their entire lives, and have little in the way of retirement savings, are in a tough situation. Those are the old people you see forced to work for Walmart.

 

[Lisa558]

But by 50, she was already behind the 8 ball. Those are things that should be addressed in the 30s.

I know. You’re preaching to the choir.

 

[Concerned American]

The primary house (condo) isn't sheltered. I think there are ways to protect it....but, not sure.

I believe their is a once per lifetime capital gains exemption for those over 55 that shelters 250K per individual and 500K for joint filers subject to a couple of restrictions on the sale of real property. So you can downsize and the remainder of your equity is tax free to those limits. One time only.

 

[alang1216]

I believe that people should have their homes paid off by 50 at the latest. Earlier if you have kids. We paid ours off after 18 years--just in time to redirect those payments to tuition for the kid. Four years later, we started bank rolling those $$, allowing us to retire with a nice nest egg early. The bottom line is young folks need to exercise fiscal discipline. Put a little away every paycheck (pay yourself first), small at first and add to it as you age. We stumbled into the thought. Purchased an item on credit when we were young and when it was paid off--we just threw that money into the bank. We operated that way through our working years. Now we don't buy anything on credit. In today's market, depending on what you buy, it saves you between 8 and 25% in interest payments conservatively.

Except for our house we never used credit for anything. We bought everything with cash on hand or we didn't buy it, including cars. The house is another matter, we'll probably never pay it off since we've refinanced it several times. Now the interest is so low it makes no sense to pay it off, our money earns more in the stock market. We always lived below our means and, though I retired years ago, the Mrs. and I are still working part-time (at jobs we enjoy so it isn't really work). We'll never have to worry about having enough money no matter how long we live and that is a nice feeling.

 

[iamwhatiseem]

No, you can take the equity you build up in one location and apply it to your new location. Better yet if you plan to retire in a lower-cost area.

I‘m right outside DC, where a townhouse is easily $700,000 - $800,000. I could retire to Florida in a seaside condo for half that - and pocket the rest. Then let’s say after 5 years, I’m bored with Florida and want to go to North Carolina. I simply take the cash from the Florida sale and use it for my new NC place.

The key is to be mortgage-free by retirement.

It certainly is. As well as a newer car that is also paid off.
They won't likely last you all the way, and not meant to... but allows you to save up till the time comes to replace it.

 

[WorldWatcher]

It depends upon how your are funding your retirement. If it is all self funded with just your investments then I am not even sure a million would be enough if you live for another 25 to 30 years

An initial investment of 2 grand with 400 a month added give you 100 grand after 15 years at 4% At 6% it is pushing 120,000.

It is hard to do that when you are young with kids. My wife and I 15 years ago had zero retirement savings. My Marine Crops pensions was all we had, and it is barely 2400 a month. Fast forward to today and we are pushing 400 grand in our 401ks and in the 5.5 years when we retire that should be in the area of 750,000 or so.

Retired Gunny @20? If so I'm in the same boat (pun intended) as a Chief @20 for about the same amount.

Our retirement plan has 3 pillars of support once we fully retire: RH, RI, RS.

RH = Retirement House
Our house will be paid off at retirement. Compared to renting that will save us about $25K in rent, for property tax/insurance of about 5K per year. Even with maintenance that would save around $75K over 5 years.

RI = Retirement Income
My wife and I are both military retirees. That means in retirement we will have 6 small incomes (My Navy, Her Navy, My Job Pension, Her Job Penson, My SS, Her SS). None of which are large, but combined we'll be fine.

Traditionally our incomes have been about 60/40 with me being the workaholic. If she passes first I'll be OK with the 60%. If I pass first my SS differential + Navy Survivor Benefit Program will bring her up to +/- $1000 of my 60%.

Our military retirement is not huge, but it's a true blessing as it has given us financial stability and the means of paying the mortgage and/or saving.

RS = Retirement Savings
Retirement savings is something we started in our early 30's. Not much back then but something. Combined our tax deferred savings (401K & Trad IRA) are - ah - over $500K. With some more in CD's as an Emergency Fund that we can access quickly.

However RS isn't there to live on. We should be fine with RI, RS is something we will be keeping in reserve for much later (hopefully much later) for a health event, the need for assisted living, or long term care.

WW

 

[WorldWatcher]

I believe their is a once per lifetime capital gains exemption for those over 55 that shelters 250K per individual and 500K for joint filers subject to a couple of restrictions on the sale of real property. So you can downsize and the remainder of your equity is tax free to those limits. One time only.

Topic no. 701, Sale of your home | Internal Revenue Service

Topic No. 701 Sale of Your Home

www.irs.gov

That was changed a number of years ago, can't remember when.

But it used to be a lifetime exemption, now it's an Owned/Use exemption. Basically, IIRC, you can now qualify after a new 5 year period if you have occupied the residence for 2 of 5 years.

WW

 

[Harpy Eagle]

Retired Gunny @20? If so I'm in the same boat (pun intended) as a Chief @20 for about the same amount.

Yep, retired Gunny at 20. Got out in 2009.

Our retirement plan has 3 pillars of support once we fully retire: RH, RI, RS.

We are much the same, except we will not have RH. We will sell the house we are now in and use its proceeds for paying rent.

We have the same little pots, except my wife was never in the military. We will have my MC retirement, her VA pension, my job pension, and both our SSs. All those together come up to about what our current take home pay is if you remove some of the extras we are paying right now like the money going into our 401ks (TSP for her), 3 car payments, college for our son and a few other things that will be gone when we retire.

We also do not plan to touch the savings until the Govt forces us to do so, so 7 years after I retire.

We are also planning to move to Panama when we retire and us it as our base of operations as we get all the travelling and wanderlust worked out of our system early in retirement. We could live comfortably on what we will have in the US, but moving abroad opens up about 40% more of our funds to do things like travelling and the like. It seems a no brainer to us.

 

[sparky]

Poppycock....all one needs is a piglet.....

~S~

 

[WorldWatcher]

Yep, retired Gunny at 20. Got out in 2009.




We are much the same, except we will not have RH. We will sell the house we are now in and use its proceeds for paying rent.

We have the same little pots, except my wife was never in the military. We will have my MC retirement, her VA pension, my job pension, and both our SSs. All those together come up to about what our current take home pay is if you remove some of the extras we are paying right now like the money going into our 401ks (TSP for her), 3 car payments, college for our son and a few other things that will be gone when we retire.

We also do not plan to touch the savings until the Govt forces us to do so, so 7 years after I retire.

We are also planning to move to Panama when we retire and us it as our base of operations as we get all the travelling and wanderlust worked out of our system early in retirement. We could live comfortably on what we will have in the US, but moving abroad opens up about 40% more of our funds to do things like travelling and the like. It seems a no brainer to us.

If I look at just some selected items as I transition from working world to retirement:

#1 Ignoring Navy retirement as it doesn't change.

#2 Current Employer Income (Gross) leaves about 80% Disposable Income. That's based on:

• SS Tax = 6.2
• Medicare Tax = 1.45%
• Required Contribution to Employer Pension = 5%
• Mortgage (Principal & Interest) = 6.5%

#3 In retirement, the Employer Income goes away and is replaced by a small pension and SS to the tune of 78% of current salary. However, SS goes to 0%, Medicare goes to 0%, Pension contribution goes to 0%, and we'll pay off the house so it goes to 0%. That means we get to keep all 78%.

#4 So gross income remains relatively flat, however we'll have more disposable income in retirement because of not making further 401K contributions. That's how we can maintain the same standard of living (and maybe squeeze in some travel) without having to touch savings. (Well until Uncle Sam requires it, but even then we'll plan on moving it to "sister" non-tax deferred accounts.)

WW

 

[Harpy Eagle]

If I look at just some selected items as I transition from working world to retirement:

#1 Ignoring Navy retirement as it doesn't change.

#2 Current Employer Income (Gross) leaves about 80% Disposable Income. That's based on:

• SS Tax = 6.2
• Medicare Tax = 1.45%
• Required Contribution to Employer Pension = 5%
• Mortgage (Principal & Interest) = 6.5%

#3 In retirement, the Employer Income goes away and is replaced by a small pension and SS to the tune of 78% of current salary. However, SS goes to 0%, Medicare goes to 0%, Pension contribution goes to 0%, and we'll pay off the house so it goes to 0%. That means we get to keep all 78%.

#4 So gross income remains relatively flat, however we'll have more disposable income in retirement because of not making further 401K contributions. That's how we can maintain the same standard of living (and maybe squeeze in some travel) without having to touch savings. (Well until Uncle Sam requires it, but even then we'll plan on moving it to "sister" non-tax deferred accounts.)

WW

What age do you plan to start taking SS?

 

[WorldWatcher]

What age do you plan to start taking SS?

66

WW

 

[Harpy Eagle]

66

WW

Unless our plans change I will start at 65 and my wife at 62, which is when we will retire.

 

[WorldWatcher]

Unless our plans change I will start at 65 and my wife at 62, which is when we will retire.

Unlike you. My wife is older than I am.

By 31 days and I never let her forget it.

WW

 

[Winston]

Thing is that if you sell your condo, and buy at half that in Fl. The other half is not going to be sheltered from taxes.
You need to figure that one out and get some good advice.

Yes it is provided certain conditions are met.

Capital Gains Tax on Home Sales

Capital gains taxes on real estate and property can be reduced when you sell your home, up to certain tax limits, if you meet the requirements.

www.investopedia.com

 

[Winston]

Topic no. 701, Sale of your home | Internal Revenue Service

Topic No. 701 Sale of Your Home

www.irs.gov

That was changed a number of years ago, can't remember when.

But it used to be a lifetime exemption, now it's an Owned/Use exemption. Basically, IIRC, you can now qualify after a new 5 year period if you have occupied the residence for 2 of 5 years.

WW

Yes, you can do it for your primary residence every five years.