Wish to retire in 7 yrs. and request financial advice

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afr
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Wish to retire in 7 yrs. and request financial advice

Post by afr »

Hi,
I'm currently 60 yrs. old(wife is 55) and would like to retire in 7 yrs. We had a very late start due to a poor business decision I had made-Vanguard accounts

TIRA(non-deductible)-STAR-$132,000/wife-$104,000(we both max yearly)
ROTH IRA(started when we qualified and will contribute towards this yr due to income drop)-STAR-$16,000/wife-$17,000
We were in the 24% tax bracket and I was planning on doing gradual Roth conversions in retirement, when I anticipate being in a much lower tax bracket.

joint taxable account-
VEXAX-$4600
VGHCX-$13,000
VMLTX-$17,000
VTIAX-$8500
VTSAX-$74,000

401k(pooled office account thru my employer and managed with Raymond James-about 60%equity/40%fixed, no match and unable to accept any rollovers. I max out yearly and keep in order to reduce my taxable income)-$335,000 Wife has no 401k available

Emergency cash account with AMEX online savings(earning 1%)-$49,500

Currently have $149,700 remaining on a 30 yr fixed mortgage of $233,000@4%(home currently worth ~$350,000) and we also add an extra $500/mo principal pmt.
Auto loan with $11,250 remaining on a loan of $13,900@1.99%

Any advice would be appreciated. Thank you
sailaway
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Re: Wish to retire in 7 yrs. and request financial advice

Post by sailaway »

A crucial factor in determining financial preparedness is to take a close look at your expenses.

You should probably also look at your projected SS benefits.
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FelixTheCat
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Re: Wish to retire in 7 yrs. and request financial advice

Post by FelixTheCat »

FireCalc will give you an idea https://www.firecalc.com/
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JoeRetire
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Re: Wish to retire in 7 yrs. and request financial advice

Post by JoeRetire »

afr wrote: Thu Jul 16, 2020 2:03 pm Any advice would be appreciated. Thank you
I'd advise you to determine what your expenses will be in the retirement you envision, how much more you can save over the next 7 years, and what other income streams you will have (such as Social Security benefits).

Only then will you be able to determine your ability to retire as you wish.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

What about the funds that we have? Would you advise any changes?
Topic Author
afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

2019 our MAGI was $245,000. I max out my 401k and our IRA's. My 2019 basis was $66,000 and my wife's was $53,000. Our income is going to be significantly lower this yr. since we were both on UE for a few months.
Our current monthly expenses-
mortgage-$2008(includes escrow and extra $500 principal payment)
medical-$1325(neither of us are offered medical thru work)
food-~$600
car pmt-$398
cell phone-$250(for 4 phones)
cable/internet-$250
HOA-$170
That's what I can currently recall. I know there's some more(utilities,etc).
as9
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Re: Wish to retire in 7 yrs. and request financial advice

Post by as9 »

The balance may be too low to get the best rates, but I think you can definitely refinance to something better than 4%. From there you'll get some differing opinions on whether you should prioritize paying it down as fast as possible vs. extra taxable investing. Having a better handle on your budget / retirement income needs will help inform that decision.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

My monthly NET varies but averaged about $12,000(in 2019) and my wife is about $2200/mo. Currently, not even close for me. My last biweekly check was for $2200. Same as my wife. Though I'm still receiving the federal $600/wk bump til the end of July.

Our current monthly expenses-
IRA contributions-$1166
mortgage-$2008(includes escrow and extra $500 principal payment)
medical-$1325(neither of us are offered medical thru work)
food-~$600
car pmt-$398
cell phone-$250(for 4 phones)
cable/internet-$250
HOA-$170
That's what I can currently recall. I know there's some more(utilities,disability,life,auto,malpractice ins.,etc).
medic
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Re: Wish to retire in 7 yrs. and request financial advice

Post by medic »

You have monthly expenses of $5K. What are your annual expenses going to be in retirement - will you sell your home, take medicare, vacations/hobbies, etc? What will your SS income be? What are your irregular expenses?

This is a major factor in your ability to retire. $60K/yr of spending is going to require $1.5M if you use a back of the envelope 4% rule and assume no SS.
You maybe able to withdraw more since you're retiring a bit later, but your wife is younger and may need the full 30+ years.

Spend a bit of time going through your CC and debit card statements for the past year and figure out where the money is really going and which items get trimming down or go up in retirement. Right now, we'd just be guessing if you can make the numbers or not.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

medic wrote: Thu Jul 16, 2020 4:58 pm You have monthly expenses of $5K. What are your annual expenses going to be in retirement - will you sell your home, take medicare, vacations/hobbies, etc? What will your SS income be? What are your irregular expenses?

This is a major factor in your ability to retire. $60K/yr of spending is going to require $1.5M if you use a back of the envelope 4% rule and assume no SS.
You maybe able to withdraw more since you're retiring a bit later, but your wife is younger and may need the full 30+ years.

Spend a bit of time going through your CC and debit card statements for the past year and figure out where the money is really going and which items get trimming down or go up in retirement. Right now, we'd just be guessing if you can make the numbers or not.
We're planning on selling our home and move to AZ into a home w/no mortgage. So no mortgage, medical for my wife(I'll be on Medicare so I'm figuring $500/mo for myself), $3300/mo SS for myself, wife a bit less 4 yrs later. Most of our money goes to mortgage and medical insurance. Assuming no car payment also.
inverter
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Re: Wish to retire in 7 yrs. and request financial advice

Post by inverter »

You’re going to cut it pretty right so I would recommend you sit down and plan out all of your expenses in retirement.
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retiredjg
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Re: Wish to retire in 7 yrs. and request financial advice

Post by retiredjg »

afr wrote: Thu Jul 16, 2020 3:11 pm What about the funds that we have? Would you advise any changes?
I rearranged some of the information you have given us into a format that is easier to understand. This is what you have told us unless I made a transcribing mistake.
  • Ages 60/55
    would like to retire in 7 yrs
    24% tax bracket
    planning on doing gradual Roth conversions in retirement
    Wife has no 401k available.

    Emergency cash account with AMEX online savings(earning 1%)-$49,500

    Currently have $149,700 remaining on a 30 yr fixed mortgage of $233,000@4%(home currently worth ~$350,000) and we also add an extra $500/mo principal pmt.
    Auto loan with $11,250 remaining on a loan of $13,900@1.99%


    Total portfolio = $721,100

    joint taxable account $117,100
    3.9% VEXAX-Vanguard Extended Market Index.$4600
    11.1% VGHCX- Vanguard Health Care $13,000
    14.5% VMLTX-Vanguard Limited Term Tax Exempt Fund $17,000
    7.3% VTIAX-Vanguard Total International Index $8500
    63.2% VTSAX- Vanguard Total STock Index$74,000

    His 401k-$335,000
    pooled account at 60% stocks and 40% bonds

    His TIRA (basis = $66,000)
    STAR-$132,000/wife

    Her TIRA (basis = $53,000)
    STAR $104,000

    His ROTH IRA
    STAR $16,000

    Her Roth IRA
    STAR -$17,000

Your funds are pretty much OK. The most obvious change that might be suggested is to replace the STAR fund with Vanguard's LifeStrategy Moderate Growth which is also allocated at 60% stocks and 40% bonds. The LS Mod Growth fund has a lower expense ratio (.13%), but contains more international stocks and an allocation to international bonds. You may be trying to avoid that.

The LS Mod Growth fund would save about $250 a year with the current balances.

To get the lowest cost portfolio, you would want to break up the STAR fund into individual components which would save a little more.


It appears to me you are doing all the right things. I'm not sure you will need to work another 7 years but you might if the market is not kind. It looks like SS will cover a reasonable portion of your expenses in retirement which will reduce the amount needed from your nest egg.
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retiredjg
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Re: Wish to retire in 7 yrs. and request financial advice

Post by retiredjg »

A could of tiny tweaks - you don't really need the extended market in taxable since those stocks are included in the total stock market. I'm not sure I'd add more to Health Care because I don't think it is very tax-efficient. The little bit you have in these is not a problem.
utvolfan
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Re: Wish to retire in 7 yrs. and request financial advice

Post by utvolfan »

I'd recommend taking a closer look at expenses. You didn't include anything for auto insurance, utilities like electricity and water, miscellaneous expenses like clothing, haircuts, vacations, gifts, donations, car/home maintenance, etc. It is quite helpful to go back through at least the past year or so, and at a minimum just ballpark other expenses that you know are monthly, weekly or whatever. It all adds up.
Outer Marker
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

afr wrote: Thu Jul 16, 2020 2:03 pm Currently have $149,700 remaining on a 30 yr fixed mortgage of $233,000@4%(home currently worth ~$350,000) and we also add an extra $500/mo principal pmt.
Auto loan with $11,250 remaining on a loan of $13,900@1.99%
Refinance to today's lower rates. Retire the mortgage asap.

I would dip into the $50K emergency fund and pay off the car loan @2% vs earning 1% in online savings. Pay yourself back and rebuild the emergency fund with what you would have made in car payments. This close to retirement, and with other saving built up, I'm not sure you need that big an emergency fund anyway. I'd be inclined to roll most of it up into your overall asset allocation and/or pay down the mortgage.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

I'm hoping to have the mortgage paid off(or close to it), no more life($1200/yr), disability($2300/yr) or malpractice($1500/yr) insurance. Auto insurance is currently $2800/yr and medical is $1340/month(though I'm assuming mine will decrease somewhat when I qualify for Medicare in 5 yrs; will have to carry my wife for a few yrs). Our property/school taxes/homeowners ins) are currently in an escrow account and paid thru our mortgage co($3200/yr) and homeowners is $768/yr. Heat/electric averages $140/month and water averages $80/month. We really don't vacation(at least not planning to in the near future) and would like to sell our townhouse(approx value $340k) in 7-8 yrs when I call it quits. We'd like to downsize to a less expensive 55 and over community in the Phoenix,AZ region(Sun City, Bullhead City may be possibilities) since one of our kids lives in Scottsdale.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Thank you for all of your replies. Our current financials(on paper at least) have changed slightly. Our only debt is our mortgage with a remaining principal of 138k(based on original mortgage of 230k@4%). Couldn't convince my wife to refi, since she said we're going to sell in another 6 more years(when i retire) and didn't wish to lay out the $$$ to cover the costs. Still planning to move to AZ to a less expensive property that will not require us to take out a mortgage for.

Current major monthly and anticipated future expenses-
mortgage-$1524(includes escrow), plus we add an additional$500 principal pmt.-plan to have no mortgage in retirement

medical premium-$1335-I'll be 61 in May of this year, so hopefully be on Medicare(assuming its still there) in another 4 yrs. Wife is 56 yrs and will be 57 in Jan. '22. So will have my Medicare premium/supplemental and have to carry her for several yrs. on private.

Overall we live fairly frugally. Don't really travel other than visiting our daughter in AZ. Don't anticipate any real travel in the future. My income has dropped since I cut back(out of necessity)work to 3 days/week and anticipate my income to be 165-175k for the next 6 yrs. My wife currently works 3 days/week and her gross income is approx. 35k. We max my 401k and our IRA's and add to the taxable also.

Current assets-
Home is worth approx.(Zillow est. 417k if that means anything)
own 2 cars
My 401k-405k
IRA's(mainly TIRA's w/smaller Roth's)-354k
joint taxable acct-157k
online savings-43k

I'm anticipating my SS income to be 3k/mo(I'll be 67 yrs of age when I start collecting) until that's cut sometime in the near future. My wife's SS at 67 yrs will be $1338, unless she takes it at 62 which would be about $900/mo. We'll most likely do gradual Roth conversions in retirement since our tax bracket will be lower than what it currently is. To do it now would cost us too much due to the pro rata rule.
HomeStretch
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Re: Wish to retire in 7 yrs. and request financial advice

Post by HomeStretch »

afr wrote: Sat Apr 24, 2021 4:10 pm ... Our only debt is our mortgage with a remaining principal of 138k(based on original mortgage of 230k@4%). Couldn't convince my wife to refi, since she said we're going to sell in another 6 more years(when i retire) and didn't wish to lay out the $$$ to cover the costs. ...
Have you checked refi rates for loans with no/low closing costs? You should be able to do better for a 10 or 15-year term than your current rate of 4%. Check the recent posts in the refinance mega thread:
viewtopic.php?f=2&t=289559
Topic Author
afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

I just made our final '21 TIRA contributions for the year. Still contributing to my employers pseudo 401k only for the pretax benefit. I'm planning to make remaining yearly contributions primarily to VEXAX(and maybe a little to VTSAX) in our joint taxable account. I'm finished contributing to VGHCX, VMLTX and VTIAX indefinitely. And still adding the extra $500/mo principal payment to my mortgage. Couldn't get my wife to agree to refi our current mortgage with a balance of 138k@4%. She was against paying closing costs for a home that we're only planning to stay in for another 6 years.
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

Your wife is being silly. Does she not get the concept of a “no closing cost” refi? No cost means no cost. You’re paying more money at a higher rate than you need to for nothing. If you can afford $500 extra, you should be able to get a 15 year in the mid 2% range and pay less monthly. It’s a no brainer. Seriously. Take enough negative points and you can actually turn a PROFIT at closing and still get a lower rate. Check at AmeriSave and loandepot. :beer
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Outer Marker wrote: Fri May 14, 2021 8:55 am Your wife is being silly. Does she not get the concept of a “no closing cost” refi? No cost means no cost. You’re paying more money at a higher rate than you need to for nothing. If you can afford $500 extra, you should be able to get a 15 year in the mid 2% range and pay less monthly. It’s a no brainer. Seriously. Take enough negative points and you can actually turn a PROFIT at closing and still get a lower rate. Check at AmeriSave and loandepot. :beer
$3000 closing costs is not exactly no-cost. Amerisave and loandepot both will cost me $3000 to refi. I'm not sure you are correct on that matter. Not sure any bank is going to charge me nothing to refi.
go2run
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Re: Wish to retire in 7 yrs. and request financial advice

Post by go2run »

afr wrote: Fri May 14, 2021 9:16 am
Outer Marker wrote: Fri May 14, 2021 8:55 am Your wife is being silly. Does she not get the concept of a “no closing cost” refi? No cost means no cost. You’re paying more money at a higher rate than you need to for nothing. If you can afford $500 extra, you should be able to get a 15 year in the mid 2% range and pay less monthly. It’s a no brainer. Seriously. Take enough negative points and you can actually turn a PROFIT at closing and still get a lower rate. Check at AmeriSave and loandepot. :beer
$3000 closing costs is not exactly no-cost. Amerisave and loandepot both will cost me $3000 to refi. I'm not sure you are correct on that matter. Not sure any bank is going to charge me nothing to refi.
If you refi with a closing cost of $3000, what is your interest savings over the time frame. Knowing your break even timing will help guide that decision. Lay out all options- 15yr, 30yr and run the numbers.
HomeStretch
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Re: Wish to retire in 7 yrs. and request financial advice

Post by HomeStretch »

Did you ask about all the refi options for rates/closing costs? Some lenders offer a refi with no closing costs with a higher rate (that is likely better than your current rate). A lower rate would save you substantial $$$ over 6 years.
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mrmass
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Re: Wish to retire in 7 yrs. and request financial advice

Post by mrmass »

cable/internet and cell phone $500/month. If you're on comcast see if you can move the cell phones to them and get their skinniest offering.
Return some cable boxes/DVRs to lower the monthly costs
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

afr wrote: Fri May 14, 2021 9:16 am
Outer Marker wrote: Fri May 14, 2021 8:55 am Your wife is being silly. Does she not get the concept of a “no closing cost” refi? No cost means no cost. You’re paying more money at a higher rate than you need to for nothing. If you can afford $500 extra, you should be able to get a 15 year in the mid 2% range and pay less monthly. It’s a no brainer. Seriously. Take enough negative points and you can actually turn a PROFIT at closing and still get a lower rate. Check at AmeriSave and loandepot. :beer
$3000 closing costs is not exactly no-cost. Amerisave and loandepot both will cost me $3000 to refi. I'm not sure you are correct on that matter. Not sure any bank is going to charge me nothing to refi.
I’m definitely correct on this. I’m easily over 15 refi’s including 3 in the last 18 months. The way it works is you take “negative points” paid to you at closing in exchange for taking a higher rate on the loan. Let’s say market rate is 2.5% on 15 year money. You take the loan at 2.75%, and get a $3,000 credit that covers your cost. Nothing out of pocket and you get a much lower rate than you have, even if not the lowest possible. Since I plan to pay off my loan well before term, I care more about immediate out of pocket costs. I’ll refi at the drop of a hat to save1/8 point - if it costs me nothing. As I said, it’s a total no brainer in your situation. Also, ignore the prepaids and escrows which you get back from the prior lender. All that matter are lender fees and 3rd party costs like appraisal and attorney fees. Take enough negative points to cover those.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

mrmass wrote: Fri May 14, 2021 10:03 am cable/internet and cell phone $500/month. If you're on comcast see if you can move the cell phones to them and get their skinniest offering.
Return some cable boxes/DVRs to lower the monthly costs
Nope. Verizon internet $40/mo., Hulu live $70/mo., ATT cell $169/mo.(4 phones). Own our phones and Verizon modem/router.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Outer Marker wrote: Fri May 14, 2021 10:23 am
afr wrote: Fri May 14, 2021 9:16 am
Outer Marker wrote: Fri May 14, 2021 8:55 am Your wife is being silly. Does she not get the concept of a “no closing cost” refi? No cost means no cost. You’re paying more money at a higher rate than you need to for nothing. If you can afford $500 extra, you should be able to get a 15 year in the mid 2% range and pay less monthly. It’s a no brainer. Seriously. Take enough negative points and you can actually turn a PROFIT at closing and still get a lower rate. Check at AmeriSave and loandepot. :beer
$3000 closing costs is not exactly no-cost. Amerisave and loandepot both will cost me $3000 to refi. I'm not sure you are correct on that matter. Not sure any bank is going to charge me nothing to refi.
I’m definitely correct on this. I’m easily over 15 refi’s including 3 in the last 18 months. The way it works is you take “negative points” paid to you at closing in exchange for taking a higher rate on the loan. Let’s say market rate is 2.5% on 15 year money. You take the loan at 2.75%, and get a $3,000 credit that covers your cost. Nothing out of pocket and you get a much lower rate than you have, even if not the lowest possible. Since I plan to pay off my loan well before term, I care more about immediate out of pocket costs. I’ll refi at the drop of a hat to save1/8 point - if it costs me nothing. As I said, it’s a total no brainer in your situation. Also, ignore the prepaids and escrows which you get back from the prior lender. All that matter are lender fees and 3rd party costs like appraisal and attorney fees. Take enough negative points to cover those.
Agreed, but can't convince my wife. Even if its only 6 more years in our home.
Tom_T
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Tom_T »

I have six years left on my 15-year loan at 3.5%. And, I too plan to retire by then, maybe a little sooner. I believe I can get a 10-year at 2.5% with no fees. If I add to the new monthly payment to make it match my current payment, I estimate that I will pay it off six months earlier... and if I want to lump-sum it in the last two years to pay it off earlier, I'll need $8-10K less to do so. That sounds like a no-brainer to me. Plus I'd have the flexibility to just use the lower payment if something happens to my job and I need to free up monthly cash flow.

Luckily (?), my wife leaves this stuff up to me, although I do explain the rationale behind any such move.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Tom_T wrote: Fri May 14, 2021 12:41 pm I have six years left on my 15-year loan at 3.5%. And, I too plan to retire by then, maybe a little sooner. I believe I can get a 10-year at 2.5% with no fees. If I add to the new monthly payment to make it match my current payment, I estimate that I will pay it off six months earlier... and if I want to lump-sum it in the last two years to pay it off earlier, I'll need $8-10K less to do so. That sounds like a no-brainer to me. Plus I'd have the flexibility to just use the lower payment if something happens to my job and I need to free up monthly cash flow.

Luckily (?), my wife leaves this stuff up to me, although I do explain the rationale behind any such move.
The best 10 year low cost refi rate I could find was with Third Federal@2.79%(2.835APR) and the monthly payment would be $1319/mo. $295 in closing fees. Monthly payment on my current mortgage is $1112/mo.
HomeStretch
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Re: Wish to retire in 7 yrs. and request financial advice

Post by HomeStretch »

afr wrote: Fri May 14, 2021 2:03 pm The best 10 year low cost refi rate I could find was with Third Federal@2.79%(2.835APR) and the monthly payment would be $1319/mo. $295 in closing fees. Monthly payment on my current mortgage is $1112/mo.
If the online mortgage amortization table I used is accurate, you have ~15 years left on your mortgage term (paying monthly P&I payment of $1112).

You are currently paying $1612/month towards your mortgage ($1112 payment + $500 additional principal). The extra principal pays off your current mortgage in ~10 years.

With the refi, you pay $295 in closing fees now and $1319/monthly to pay off your mortgage in 10 years.

IMO the refi is a no brainer. You pay ~$300/month less (1st month’s savings offsets the $295) to pay off your mortgage over the same 10 year period. That’s $21,600 less paid if you stay in the house for 6 more years.

If you keep paying $1612/month on the new loan, your loan would be paid off in ~8.5 years which is only 1.5 years after your projected retirement. Pretty nice to be mortgage free in retirement.

Something to consider…
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

afr wrote: Fri May 14, 2021 10:31 am
Outer Marker wrote: Fri May 14, 2021 10:23 am
afr wrote: Fri May 14, 2021 9:16 am
Outer Marker wrote: Fri May 14, 2021 8:55 am Your wife is being silly. Does she not get the concept of a “no closing cost” refi? No cost means no cost. You’re paying more money at a higher rate than you need to for nothing. If you can afford $500 extra, you should be able to get a 15 year in the mid 2% range and pay less monthly. It’s a no brainer. Seriously. Take enough negative points and you can actually turn a PROFIT at closing and still get a lower rate. Check at AmeriSave and loandepot. :beer
$3000 closing costs is not exactly no-cost. Amerisave and loandepot both will cost me $3000 to refi. I'm not sure you are correct on that matter. Not sure any bank is going to charge me nothing to refi.
I’m definitely correct on this. I’m easily over 15 refi’s including 3 in the last 18 months. The way it works is you take “negative points” paid to you at closing in exchange for taking a higher rate on the loan. Let’s say market rate is 2.5% on 15 year money. You take the loan at 2.75%, and get a $3,000 credit that covers your cost. Nothing out of pocket and you get a much lower rate than you have, even if not the lowest possible. Since I plan to pay off my loan well before term, I care more about immediate out of pocket costs. I’ll refi at the drop of a hat to save1/8 point - if it costs me nothing. As I said, it’s a total no brainer in your situation. Also, ignore the prepaids and escrows which you get back from the prior lender. All that matter are lender fees and 3rd party costs like appraisal and attorney fees. Take enough negative points to cover those.
Agreed, but can't convince my wife. Even if its only 6 more years in our home.
It’s worth it only if you spend six more MONTHS in your home. The only “cost” is your time in doing the paperwork, which takes me less than an hour. Back in the day, I’d routinely hop back and forth between 15 and 30 year terms, just to generate the negative points. I turn a profit at every closing.

15 year loans are more of a commodity product than 10 years. Take the 10 minutes time to fill out a free application with loan depot and AmeriSave and get the full “rate sheet” for 15 year loans with all the positive and negative point options. The lender credit is money in your pocket. On my last refi, I got a $10,000 lender credit on a 15 year refi at 2.125%. My out of pocket closing costs were $2,000. Hence, an $8,000 profit at closing in addition to a great rate. I have a much larger mortgage, which is the only potential problem I see. The smaller the loan balance, the less lenders are willing to pay to hold your loan. Rates have deteriorated somewhat since last November when I did that one. But they are still much, much, better than what you have.
cacophony
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Re: Wish to retire in 7 yrs. and request financial advice

Post by cacophony »

afr wrote: Fri May 14, 2021 10:28 am
mrmass wrote: Fri May 14, 2021 10:03 am cable/internet and cell phone $500/month. If you're on comcast see if you can move the cell phones to them and get their skinniest offering.
Return some cable boxes/DVRs to lower the monthly costs
Nope. Verizon internet $40/mo., Hulu live $70/mo., ATT cell $169/mo.(4 phones). Own our phones and Verizon modem/router.
Hopefully you're taking advantage of that cell plan by using massive amounts of high speed data. If some of those phones use smaller amounts (say less than 5 GB/month each), you can save a lot with alternative plans.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

What about the question I posed earlier about limiting contributions for the next 6 years(prior to my retirement) to VEXAX only in my joint taxable account and adding it to my TIRA account(and discontinuing contributions to STAR)? VEXAX is well diversified(comparable # of stocks as VTSAX), has had better returns, and is low cost.
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retiredjg
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Re: Wish to retire in 7 yrs. and request financial advice

Post by retiredjg »

afr wrote: Sat May 15, 2021 10:01 am What about the question I posed earlier about limiting contributions for the next 6 years(prior to my retirement) to VEXAX only in my joint taxable account and adding it to my TIRA account(and discontinuing contributions to STAR)? VEXAX is well diversified(comparable # of stocks as VTSAX), has had better returns, and is low cost.
It is unclear what you mean here, but why would stop contributing to total stock and just contribute to extended market?

Adding what to tIRA?
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

retiredjg wrote: Sat May 15, 2021 10:43 am
afr wrote: Sat May 15, 2021 10:01 am What about the question I posed earlier about limiting contributions for the next 6 years(prior to my retirement) to VEXAX only in my joint taxable account and adding it to my TIRA account(and discontinuing contributions to STAR)? VEXAX is well diversified(comparable # of stocks as VTSAX), has had better returns, and is low cost.
It is unclear what you mean here, but why would stop contributing to total stock and just contribute to extended market?

Adding what to tIRA?

I'm just not so enthralled over some of the top holdings in VTSAX. I have both funds in the joint taxable(VEXAX and VTSAX) but our TIRA's are comprised of the STAR fund only.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Currently down to 6 yrs. before retirement. Me-61, wife-56 MFJ 24% tax bracket

debt-mortgage $137,000 balance(RE valued at 415k)-we add an extra $500/mo. principal payment and will be left with maybe $40,000 balance when we sell. My wife will not refi.our current note. Planning to sell after I retire and downsize to a retirement community in AZ, where one of our children lives. My SS payment should be close to $3000/mo. when I take it at 67. My wife will probably take her SS at 62.

emergency savings(AMEX online savings)-$40,000(covers 6-8 months expenses)

Me-
401k(pooled office account/no match/approx. 60% equity/40% fixed-not permitted to make any rollovers/managed by Raymond James)-used only for pretax benefit-$405,000

Non-deductible TIRA-Vanguard STAR fund-$179,500(basis $73,000)
Roth IRA(old account when we qualified)-STAR-$19,500

Wife-
No 401k
Non-ded. TIRA-STAR-$144,000(basis $60,000)
Roth IRA-STAR-$21,600

Joint taxable account-all Vanguard current values
extended market index-$9200
total stock index-$107,500
total intl. stock index-$11,250
limited term tax-exempt-$17,000
health care fund-$15,400

I switched the holding options(dividends and capital gains)of the Health Care fund to be directed to the Total Stock Index fund. I've discontinued making any further contributions to the health care fund(actually haven't made any for some time).
I unfortunately knew nothing about a backdoor Roth until a few years ago and by then the damage was done. I've been filing form 8606 since we started the non-deductible TIRA's. I am no longer contributing to either of them and just plowing all of our retirement contributions to the total stock index in our joint taxable account. My plan is to do Roth conversions in retirement(we'll be in a lower tax bracket). I'm also considering exchanging our current non-ded.TIRA's from the STAR fund to the Vanguard Treasury Money Market Fund for security and to mitigate the cost of converting to our Roth IRA's in the future. And lastly I'm going to exchange the funds in our Roth IRA's to either the Life Strategy Moderate Growth fund or the Target Retirement 2030 fund(slightly heavier in stocks). Not sure which yet. I'd appreciate any and all advice. Thank you.
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life in slices
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Re: Wish to retire in 7 yrs. and request financial advice

Post by life in slices »

afr wrote: Fri May 14, 2021 9:16 am
Outer Marker wrote: Fri May 14, 2021 8:55 am Your wife is being silly. Does she not get the concept of a “no closing cost” refi? No cost means no cost. You’re paying more money at a higher rate than you need to for nothing. If you can afford $500 extra, you should be able to get a 15 year in the mid 2% range and pay less monthly. It’s a no brainer. Seriously. Take enough negative points and you can actually turn a PROFIT at closing and still get a lower rate. Check at AmeriSave and loandepot. :beer
$3000 closing costs is not exactly no-cost. Amerisave and loandepot both will cost me $3000 to refi. I'm not sure you are correct on that matter. Not sure any bank is going to charge me nothing to refi.
Find a good local broker and have him/her check rates for a no-cost loan
I have refinanced many times on current house over the past 15 years and every loan has been a $0 cost to me loan - they are out there (credit dependant), just have to have a knowledgable broker track them down.
Outer Marker
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

afr wrote: Mon Jun 14, 2021 2:47 pm I'd appreciate any and all advice. Thank you.
Why seek advice if you are not willing to make changes?

1. It is clearly a mistake not to refi at no cost to a lower rate mortgage.

2. It is likely a mistake to take SSI at FRA and not wait until 70. viewtopic.php?t=102609
ZWorkLess
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Re: Wish to retire in 7 yrs. and request financial advice

Post by ZWorkLess »

First thing I'd advise would be to refi your home to a better interest rate. You should be able to do a lot better than 4%. (Unless you plan to move out of this house before or at retirement, in which case, you can do the math as to whether it's worth the costs, depending on your timeline.)

In your shoes, I'd likely stick with a 30 year mortgage and not expect to ever pay it off -- mainly in order to preserve your cash since you're hoping to retire fairly soon and may find yourself a bit cash crunched. If you strongly prefer to get it paid off before retirement, then do a 15 year, which would probably get you a bit better interest rate.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

I suppose I should restate. I'd really like advice regarding my retirement portfolio and the possible changes that I'm thinking of making. My wife's feelings are that we are going to sell our property in 6 yrs. and does not want to go thru the headache of added costs and paperwork involved. I don't know what else to say regarding that matter. Thank you.
wetgear
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Re: Wish to retire in 7 yrs. and request financial advice

Post by wetgear »

afr wrote: Mon Jun 14, 2021 3:16 pm I suppose I should restate. I'd really like advice regarding my retirement portfolio and the possible changes that I'm thinking of making. My wife's feelings are that we are going to sell our property in 6 yrs. and does not want to go thru the headache of added costs and paperwork involved. I don't know what else to say regarding that matter. Thank you.
If you edit your original post (use the pencil icon at the top) in this format you'll likely get better and more complete advice: viewtopic.php?f=1&t=6212

You've included some of the information but there is still a bunch missing and it could use a bit of organization.

Your investments are likely good enough, they could be slightly optimized into a 3 fund portfolio but we are still missing some information from the requested format.

That being said optimizing your retirement portfolio is mostly just a waste of time if you don't sort the low hanging fruit that other people keep circling back to in it this thread. It's penny wise pound foolish to focus on your portfolio optimization without refinancing and getting a better handle on your budget/expenses first. To say "That's what I can currently recall" basically admits you need to do more homework because you've provided an incomplete list but only you have the information that we need to help you. If you want a comfortable retirement work on the big things first, further optimizing your portfolio doesn't make that list
Outer Marker
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

afr wrote: Mon Jun 14, 2021 3:16 pm I suppose I should restate. I'd really like advice regarding my retirement portfolio and the possible changes that I'm thinking of making. My wife's feelings are that we are going to sell our property in 6 yrs. and does not want to go thru the headache of added costs and paperwork involved. I don't know what else to say regarding that matter. Thank you.
I don't mean to be pedantic, but doesn't the fact that nearly every poster points to your excessively high mortgage rate as the prime area for improvement tell you something? There is no "added cost" of doing a no-cost refi. The "headache" and "paperwork" are about an hour in doing on online application and uploading a few forms. And it is worth thousands in your case of 100% guaranteed, risk-free money. Nothing else in your situation come close in terms of risk-free benefit. You can save a few pennies from converting the higher cost star fund to lower cost life strategy moderate growth, but it won't mean much, and you may or may not value Vanguard's active management of Star. (I don't). Don't switch from Star to Treasury in your TIRA unless you want to change your risk profile. Don't get me wrong. I'm trying to help! This is such a no brainer.

One other thing - as far as you TIRAs and backdoor Roths are concerned. They are kind of an intertwined mess at the moment. It would take some work (a lot more than a refi), but you could explore rolling the TIRA's into your respective 401Ks, then make future non-deductible TIRA conversions and convert them immediately to Roth. Given your hesitancy on the refi, I am not sure you are up for the financial maneuvering that would be required.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

I would do the refi, unfortunately I can't convince my wife. As to my 401k-its a pooled office account in which I can either participate with or not. I'm not in control of the AA and I'm not able to rollover any of my TIRA basis into it. Spoke to my office manager about it and got a firm no. I wish I could. My wife has no 401k thru work. The only reason I mentioned the possibility of exchanging our TIRA's from the STAR to Treasury money market was to at least preserve what we've got in there and minimize the cost of Roth conversions in 6 yrs.
wetgear
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Re: Wish to retire in 7 yrs. and request financial advice

Post by wetgear »

afr wrote: Mon Jun 14, 2021 3:59 pm I would do the refi, unfortunately I can't convince my wife. As to my 401k-its a pooled office account in which I can either participate with or not. I'm not in control of the AA and I'm not able to rollover any of my TIRA basis into it. Spoke to my office manager about it ad got a firm no. I wish I could. My wife has no 401k thru work.
Maybe show her this thread or ask her if it's worth working a bit longer instead of dealing with the "headache" of refinancing. Working for 7.5-8 years will probably make up for the interest related losses. You could do all the work of the refi and just ask for her to sign the documents with you when the notary visits.

Your investments are fine, personal finance is where you need to focus.
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

afr wrote: Mon Jun 14, 2021 3:59 pm I would do the refi, unfortunately I can't convince my wife. As to my 401k-its a pooled office account in which I can either participate with or not. I'm not in control of the AA and I'm not able to rollover any of my TIRA basis into it. Spoke to my office manager about it and got a firm no. I wish I could. My wife has no 401k thru work. The only reason I mentioned the possibility of exchanging our TIRA's from the STAR to Treasury money market was to at least preserve what we've got in there and minimize the cost of Roth conversions in 6 yrs.
Well, let me start by saying, "happy wife, happy life". An unhappy one cost me multiple seven figures and more than half my net worth. I'd try to gently persuade her with real facts and numbers. You can fill out an online application yourself with AmeriSave and/or Loan Depot and get a rate quote with real numbers. Ignore the prepaid and escrows that you'll get back from your prior lender. With your LTV, the appraisal would likely be waived, saving you even more. Actual closing costs are probably in the $1,200 range, and if you take more "negative points" than that, you are cash positive at closing with a better rate. I don't know how your wife could object to walking away from the closing table with a check in hand from the new lender and a better rate.

Your other investments are fine. Changing from Star to Treasury is just market timing. Don't do that. Stay the course and just pay the taxes when you do the conversion, hopefully on even more earnings in the meantime.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

wetgear wrote: Mon Jun 14, 2021 4:11 pm
afr wrote: Mon Jun 14, 2021 3:59 pm I would do the refi, unfortunately I can't convince my wife. As to my 401k-its a pooled office account in which I can either participate with or not. I'm not in control of the AA and I'm not able to rollover any of my TIRA basis into it. Spoke to my office manager about it ad got a firm no. I wish I could. My wife has no 401k thru work.
Maybe show her this thread or ask her if it's worth working a bit longer instead of dealing with the "headache" of refinancing. Working for 7.5-8 years will probably make up for the interest related losses. You could do all the work of the refi and just ask for her to sign the documents with you when the notary visits.

Your investments are fine, personal finance is where you need to focus.
Gotcha. Thanks.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Outer Marker wrote: Mon Jun 14, 2021 4:24 pm
afr wrote: Mon Jun 14, 2021 3:59 pm I would do the refi, unfortunately I can't convince my wife. As to my 401k-its a pooled office account in which I can either participate with or not. I'm not in control of the AA and I'm not able to rollover any of my TIRA basis into it. Spoke to my office manager about it and got a firm no. I wish I could. My wife has no 401k thru work. The only reason I mentioned the possibility of exchanging our TIRA's from the STAR to Treasury money market was to at least preserve what we've got in there and minimize the cost of Roth conversions in 6 yrs.
Well, let me start by saying, "happy wife, happy life". An unhappy one cost me multiple seven figures and more than half my net worth. I'd try to gently persuade her with real facts and numbers. You can fill out an online application yourself with AmeriSave and/or Loan Depot and get a rate quote with real numbers. Ignore the prepaid and escrows that you'll get back from your prior lender. With your LTV, the appraisal would likely be waived, saving you even more. Actual closing costs are probably in the $1,200 range, and if you take more "negative points" than that, you are cash positive at closing with a better rate. I don't know how your wife could object to walking away from the closing table with a check in hand from the new lender and a better rate.

Your other investments are fine. Changing from Star to Treasury is just market timing. Don't do that. Stay the course and just pay the taxes when you do the conversion, hopefully on even more earnings in the meantime.
Thanks. And quite true regarding "happy wife". Does the size of the mortgage I'd be taking(137k) have any effect on getting a competitive rate?
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

afr wrote: Mon Jun 14, 2021 4:42 pm Does the size of the mortgage I'd be taking(137k) have any effect on getting a competitive rate?
It's a little on the low side to maximize your benefit in "negative points" -- but take the 15 minutes to plug in your numbers with AmeriSave or Loan Depot and see what you get! You've got to give up a little bit of personal information, but neither one of them has been bad about spamming me, and I've done a lot of business with both. Seriously, 15 minutes is all it takes. Anything over $1,200 in negative points is cash in your pocket with a lower rate to boot . . .
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

I just tried both brokers and was given rates comparable to my current rate for a no cost loan. Said I'd be looking at 3k closing costs for a 3% loan.
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

afr wrote: Mon Jun 14, 2021 5:57 pm I just tried both brokers and was given rates comparable to my current rate for a no cost loan. Said I'd be looking at 3k closing costs for a 3% loan.
What’s the rate on a 15 year term with -$1,200 in points?
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