Landlord Retirement Thoughts

As I go through my financial plan, there are always some reservations about leaving a steady job with 4 weeks of vacation and a nice tech salary.  I have checked my landlord retirement plan several times, like Santa checks his list, but a lot more often.

While I will not be without income, as I have my rentals, it certainly will be a life changing event.  I will have an additional 40+ hours a week thrown into my lap.  Here are some thoughts that run through my head as I begin the countdown to retirement…

I have read that more people fear running out of money than death in retirement.  I can certainly appreciate the fear.  Despite the fact that I save more than 100% of my gross pay at work, and have been for several years, it is a hard thought to get rid of.  What if I have to move into my apartments??  They are certainly nice, but even if I could live there fine, the renters probably would complain…

Chasing the financial independence dream does have an interesting dilemma.  Sort of like the dog chasing a car.  Once you achieve it, what will you do with it?  The same traits that lead you here, (like hard work, ambition and determination) may keep you from fully being here.

 How Much Money Do You Need?

I do not have any kids, as I have always been on the early retirement bandwagon.  I was an S&P 500 investor for a long time.  I put a lot of money in the 401K plans, and a lot in the company stock purchase plans, if they had one.  Each time I left a company I received a solid raise and always did a rollover from my company 401K to my brokerage IRA.

At some point in the mid-90s, I became a tech investor.  It was the thing to be, the Nasdaq was racing to the moon.

I invested heavily, in a high risk stocks, in the 90s.  Stocks like VRSN, SUNW, CMRC, AOL, CHINA, PLUG, RUBR, SCIE, WMMVY, CMGI, JDSU, RFMD, and many others, most of which are no longer around.  As fast as they went up, they came down.  I remember gaining as much as 40 points in a day on a stock like VRSN.  I remember my portfolio losing and gaining as much as $40K in a single day.  It was a great ride, and soon it was a losing ride.

Saving More

So I began to save, a lot.  It was all mostly in a cash account.  I figured that no matter what the market did, I could save more than enough to offset any gains the market might give, and prevent any losses.  That worked OK, and I got back into fancy names and emerging markets.  Some went up, some went down.  I did not beat the market, but I did not lose money overall.

In any case, due to my savings and switching back to an S & P foundation, my stock portfolio is doing better.  I have beaten the market in my 401K in most previous years, mostly due to my strategy of maxing out my contribution early in the year.

The stocks will give me a bit of cushion if I have a bad rental month.  I do not plan on withdrawing any of it until I am at least 62, which will be six years after I leave my job.  It is a solid amount, and will be more solid after a few more years (hopefully)…  It is a set it and forget it allocation.

If I would have stuck to my original investment strategy, I would already have been retired.

Transitioning from Saving to Spending

Switching from saving to spending will definitely be the most difficult for me.  While I will easily get used to not saving into a 401K and an H.S.A., it will be more difficult with the after tax money.  While I will not go into the amount I save here every year, it is a solid amount.  Even saving 10% of that would be a great saving.  Yet, if I am only able to save 10% of what I do now after retirement, it will feel like I am going broke.  It will be a great mental challenge for sure.

Several Different Sources of Income

To be secure in retirement, you must have multiple income streams.  I am fortunate to have several.

I have a small disability payment from the VA, which is tax free with COLA, and is effective currently.  It gives me access to free healthcare, if I do not die while I am waiting for an appointment.

The amount of money for a 10% disabled vet will not even pay for a cup of coffee a day, let alone be enough to live on.  But the healthcare is worth something.

It is interesting how a person on welfare can get better healthcare than someone who served in the military. 

I have started to use the VA for my healthcare needs, but will likely buy an additional policy.  It will cover potential emergencies if I have one and am not able to go to a VA facility.  If I am reading the documents correctly, the VA will bill my insurance company directly, but I will not have to pay any deductibles.  It counts as an out of pocket expense, even though it is not any money out of pocket.

At 55, I am eligible for a small pension from the company I have worked for ~12 years.  It’s not much at 55, but should be an OK amount, no COLA – at 65 years old.  That will be nine years after I leave my job.  So I have a gap I need to fill with income.

At 62, I have Social Security, but will likely wait until 70.  I think I can survive on my investments, pensions and rentals between now and then.  At 70 years old, I should have close to the maximum Social Security, with a COLA.

While there is always talk of Social Security running out of money, why is there never talk of welfare running out of money?

I have thought about selling some of the rentals beginning at ~62 or so, perhaps one every other year.  That will take me to 74 years of age.

My own homestead can also be split into several lots.  If I do that, I can have some extra revenue.  Selling homes to my tenants will also be a potential source of revenue.  Even three homes per year should add a bit to the bottom line.

Traveling After Retirement

So, in the meantime for the next few years after I leave my full time job, the rental income will have to suffice.  As it is well over 6 figures, about 3-4 times what I spend now, I should not have difficulty in living.  Being debt free, other than three rental mortgages, will also help.   I do want to ramp up my spending a bit, and will be doing some traveling, likely in a fifth wheel, for a few years.  Not full timing, but trips from three to six weeks at a time.  Maybe even a few trips of three+ months.  I will write about my adventures when that time comes.

Trips I have planned in my head are Alaska, Route 66, the national Parks of the South West (Grand Canyon, Zion, Moab, Death Valley, Bryce Canyon, etc.), a Mississippi River Trip, A Rte. 1 trip down the east coast i.e Maine to the Keys, etc.  Whether or not I will get to live all of those trips, I am not sure, but I am hoping to fit some of them in.  It’s something the DGF and I can do, and bring the dog along.  Taking our time, as every day will feel like Saturday (unless it feels like a holiday).

What are your plans for when you reach FI?  Will you have a problem spending, rather than saving?  Will your lifestyle be able to increase or decrease?

Which do you like more, landlord stories, or landlord financial independence stories?