Retirement / Financial advice

[a64pilot]

In three to five years I will retire and begin cruising. The boat will be paid for and re-fit, I'll have my retirement pay a small 401K and be 5 yrs away from Social Security. We should be OK, but

My house and land is paid for, it's actually held by a Corporation that I own, I have sole ownership, no other officers etc. When I sell the house, what should I do with the proceeds? Current thought is to buy a Condo somewhere and rent it out while we are gone with the idea of when we get old and have to return to land, at least we will have somewhere to return to.

Is there a better plan on what to do with the money? Do you have to buy a residence? I think I remember you had X amount of time before you had to buy another residence or be taxed pretty severely on the proceeds?

I'm in the US too, house and property in Georgia.

[rwidman]

I'll give you some good financial advice:

Find yourself a good financial planner, someone who does this for a living. Someone with knowledge of the tax system and someone who has done well for friends and/or family members.

Free advice on the Internet (especially on a boating forum) is worth exactly what you pay for it.

[sailorboy1]

Over time money invested in the market out performs real estate.

In the meantime you should start looking at the tax impact of your owning your current land etc as a corporation. I think you need to ask a tax professional not a bunch of boaters

[Randyonr3]

We faced the same issues when we sold our home a few years ago.. wont get into the wheres we put the funds but Something that made a great impact on our decision.
At what point are your funds at their greatest value? For us, it was at the peak of the market..

[Pete7]

Cruisers forum is part of a group of forums called Social Knowledge. If you scroll to the very bottom of the page you will see that one of the other forums is "Early Retirement" which might be more focussed (or might not) on financial planning.

Pete

http://www.early-retirement.org/

[Snore]

+1 financial planner. And three words "Medicaid look back". If you are not familiar with them, speak to an eldercare attorney. Not crazy about attorneys, but sometimes they come in handy.

[oldragbaggers]

I agree with others who have stated that a professional financial planner would be a much better choice than a sailing forum for this information. How would you even vet the information you received in a venue like this without knowing the specifics of the financial status (and the means by which they acquired their money) of the person giving the information? Scary thought.

[Ex-Calif]

Get some real advice but personally I like the idea of rental income...

The "average" Joes I know who are happily cruising at a youngish age all seem to have paid off property with rental income somewhere. Not seasonal rental like a resort condo but real residential income property with long term tenants.

[skipmac]

On one hand I have to agree that asking a bunch of lazy boat bums nice cruisers on this forum, for financial advise might not be the best policy.

On the other, I have not had such great advise from financial professionals either. My thoughts on investment counselors, stock brokers and the like, if they were really that good then they would be rich themselves. Also would not be talking to a poor slob like me but dealing with people with at least a few million spare cash to play with.

My experience with several over the years has been dismal. Basically any or all of them did well with my portfolio when the market was up and all of them totally screwed up when the market went down. Most recently I moved my 401K and other accounts to a firm that was the most respected in my small town. They have the accounts for a lot of local companies including my former employer who has a pretty smart CEO that choose this particular investment company.

So in 2007 I went in for my big end of the year review and planning with this financial planner. I pointed out the overheated real estate and stock markets and told the guy I thought it urgent to take a lot of my funds out of the market as I expected a crash. He objected vehemently, he expected a small correction but was adamant that it was a bad move to get out of my investments. He had me in conservative, solid funds and even in a market correction would maintain most of the value. Like a fool I let him convince me and a few months later lost almost 40% of my retirement funds.

Same thing happened to the guy I bought my boat from. He was retired and his highly respected investment planner put most of the funds in Washington Mutual, an old, conservative and rock solid company. In 2008 he lost the majority of his investment account when that rock solid company crashed and the stock went to 20 cents.

My totally uneducated opinion, if you have 20-30 years to invest and recover then the stock market does offer the best long term returns. If you are just a few years from retirement I would be very careful about putting a lot of my money any kind of stock market investments.

I still like the quote from Mark Twain, "Buy land, they aren't making it anymore." Of course Mark Twain was famous for having major financial problems and losing large sums of money in his investments.

[rwidman]

Originally Posted by Ex-Calif

Get some real advice but personally I like the idea of rental income...

The "average" Joes I know who are happily cruising at a youngish age all seem to have paid off property with rental income somewhere. Not seasonal rental like a resort condo but real residential income property with long term tenants.

I know some people who have gone into the home rental business and have had nothing but trouble. It's not all gravy and there are a bunch of laws to protect the renter but few to protect the owner.

I put my money in the hands of a professional many years ago when I was still working and it has done well.

[tomfl]

You say you have a small 401k, but don't tell us how big/small. This is something you will have to tell any financial adviser, and something I would not suggest you post in this forum.

Based on that alone I would suggest a financial adviser.

[Tingum]

Rental property for an absentee owner can turn into a nightmare! You will need a reliable property manager who will take at least 10% of the rent. Think about repairs and evictions! Better to talk to a financial planner about where to put your money. Remember you can not access the funds tied up in a rental property if you need them in a hurry.

[TacomaSailor]

IF you are not relatively sophisticated in the realm of income property, investment management and tax planning then you really need to spend some time with a financial planner.

Here are two examples of how you might do things - my long time business partner and I both quit working in 1998 - 1999 and we both went cruising.

My wife and I sold our large house in 2000 and went sailing. We had to return in 2001 to deal with unpleasant consequences of the house sale that failed many months after we thought it was completed. We invested all the proceeds from the house sale in mutual funds. We also left our IRAs in the care of a financial manager who had taken care of our money since 1984.

The stock market declines of 2002 and 2008 hit us very hard and made my wife so nervous she returned to work for a few years. We put our cruising plans on hold for that period of time.

However, out financial managers have given us an annual 9.3% (net of all expenses and taxes) return for the last 14 years.

Our house, which we owned 1982 - 2001, provided us an annual 2.5% return net of all expenses (including taxes, maintenance, insurance, appreciation, selling expenses, improvements).

My business partner took the opposite tack. He and his wife kept their home which they owned outright. The house is in a very nice Seattle suburb with great rental potential. They lease the house (two-year minimum) through a large real estate management company. The house provides their entire cruising income and guarantees his wife a known entity to which they can return when they quit cruising.

That couple has sailed from Seattle to Turkey and has been in the Med for nine-years. They return to Puget Sound once a year or every 18-months and take care of house business in between leases. They have had very good renters and almost no rental problems.

The lease income from their home provides all the money they need to cruise (they are quite frugal) and have not had to touch their IRAs which have grown significantly in the last 14 years.

The stock market declines of 2002 and 2008 had no impact on my friends cruising plans. They were in the Mediterrean at that time and their home stayed leased full time. Their IRAs did decline, but since they were not withdrawing from them, those declines had no impact on their day-to-day life.

When they return from cruising they will already own a home in their favorite neighborhood.

When we quit cruising and living aboard we will have to sell our boat, take the proceeds of that sale, and purchase a home. Our problem is that we have visited so many nice places to live that we can not decide where to settle or how much to spend on a house.

My friends already know their future - at their old home and near their kids. We have no kids, no living relatives, and have no idea where we want to settle.

Either way can work.

[a64pilot]

A couple of things
First I want to thank you for taking the time to answer

I will go to a financial adviser, but I want to go there with some ideas of my own.
I want to bounce ideas against one, no go in dumb, has to be other cruisers that have faced this same dilemma, can't be unusual, would be pretty common I would think.

This house I'm talking about selling was essentially destroyed by a renter when I was stationed in Germany, the first two renters were excellent, the third destroyed it, I've been down that road, I understand the risks.

I've talked to my Accountant about liquidating the Corp and apparently if I do, I have to report those assets as income for that year and pay taxes on them as income, I don't want to do that, that is simply not viable.

[a64pilot]

Tacoma,
Thank you for that info