OT: Early Retirement

[VictoryRed]

You can marry money or retire from the Fire Dept like my cousin at 50.

 

[WV Bruno]

My dad always says to me that your house is a place you live, not an investment. If you expect your home to appreciate greatly in value and turn you a big profit, it probably won't. Especially once you factor in how much you spend in upkeep and the interest you pay on your mortgage.

He is right. I just live day to day. My grandfather had everything going for himself. Then he had a double massive heart attack at 52 or 53 and that was that. You never know what tomorrow might bring. Prepare for it. But it is doubtful things go exactly who you intend them to go.

 

[B1G RED RULES]

As someone in their Mid-30's dreaming about never working again.....

Anyone one here retire early (like before 60)? If so how soon and what financial benchmarks were key in doing so (Paying off home/kids out of college/etc..)

OP - if you are truly interested in retiring early, best advice is find a mentor who has DONE IT successfully and learn from them. You have been given 3 pages of advice on this forum and most are likely not retired or will even retire by 65.

 

[Lincoln100]

Another opinion that is not “popular” - but that wealthy people follow. Debt (on appreciating assets) is good and will accelerate your wealth faster than being out of debt. Consumer debt is bad.

Real life example.

10 years ago, I had almost no debt. With less than a year to pay off my house and scream “I’m debt free”, I started to calculate how exciting my new debt free life would be. My home mortgage P&I payments were roughly $600 per month. Once my house was paid off, I would have $7,200.00 of “extra” money. It didn’t take too long to figure out that would not do much for my retirement, so I borrowed $150,000.00 of equity out of my home and bought single family homes. My home loan payments went from $600 to $750 per month. Over the next couple year, I bought 12 rental houses averaging just over $4,000 per year per house of tax free income. So let’s see the results of being in debt:

$150,000 in debt on home PLUS over $900,000 of debt on rental homes = $48,000 (less $1,800 extra home payments) in tax free income EVERY year.

Out of debt = $7,200.00. Invested at 20% return = $1,440 taxable income per year. After taxes you keep less than $1,000 of it.

Why was the $4000.00 per year per house tax free?

 

[SOCALHSKR]

I would be interested in the most important or valuable advice you feel you received from this thread?

 

[B1G RED RULES]

Why was the $4000.00 per year per house tax free?

Assuming each house had a value of $100,000, $80,000 of value would be attributed to the home and $20,000 would be attributed to the lot. You can depreciate the home over 27.5 years on taxes. $80,000 divided by 27.5 = $2,900 that you get to write off of the $4000 profit every year for the next 27.5 years. That leaves you with $1,100 remaining that you would have to pay tax on, but you also have an $80,000 loan on that property. An $80,000 loan at 5% interest over 30 years makes an annual payment of $5,245, of which $4,055 is interest. Interest is deductible, so you take the $4,055 and subtract it from the remaining $1,100, and you have a taxable loss. The beauty is that you still have the $4000 cash in your bank account.