| | | Happy to say I've begun end of year reviews of our IRAs and it's all good news... wife is not only on board now with DGI aspect, but has learned a lot on her own initiative and we can actually discuss things speaking the same language now... she finally whittled that cash hoard down to a reasonable number (a little less than 10% in cash for next year's withdrawals and/or emergency) and has a divvy/dist. income that matches mine close enough despite hers being more conservatively deployed. The main thing is the income has increased to the point where we have cash in both accts. for future distributions/income/cushion AND she is dripping everything for now -- until replacement cash in IRA needed -- and I have about half of mine dripping again, only tapping the CEFs I have that pay monthly and that is sufficient income for now.... so all of our IRAs are growing in total returns, but best news is the income stream they can throw off is increasing at about 8-9% a year with the dripping goosing it nicely via compounding coupled with regular divvy hikes... that was my target/goal since I am already taking SS and wanted to make up for the lost 8% by delaying benefits... I now project that in 7 years when I would have had to start benefits anyway, our IRA income streams will be growing at over 10% a year in the IRAs.
One last note, the amount of income we actually achieved in the IRAs surprised me quite a bit... now looking at tax situation in terms of what to withhold from distributions in the future -- we have effective tax rates of 17% federal and 4% state (of course, the marginal rate is 35% fed, 9% state)... we also need to adjust the withholding on her pension -- we under withheld last year to the point we owed an additional $10 grand or so and of course IRS would like us to report quarterly now -- my goal is to always match withholding to within a few hundred bucks either way so we don't owe a lot or have big refunds (in effect lending feds money interest free)... so we may end up doing quarterly anyway just to better achieve that.
Another complication is the sudden injection of after-tax money from RE deals my brother and I concluded this year and will continue annually (I ended up with more land and income from him, while giving up my equity in the old family cottage because I'm building my own 4-season one a few hundred yards away on land I bought 20 years ago).
Also need to figure out effects of leasing out mineral rights -- finally struck a deal and despite not drilling or producing anything right now (and not sure when in the future they might -- and with today's techniques will not be anywhere within sight of where we "live" nor the noise, etc.), they are already sending me "shut-in" payments on the oil and ng (dual play in Antrim Shales) in addition to the "signing bonus"... when they actually begin producing, by law, I'll get around 12.5% split of all revenues from wellheads on my property with mineral rights... this alone pretty much guarantees we will never run out (completely) of money in retirement and in fact will be a big leg up for the daughter after we're gone... the shut-in payments alone are in low 4 figures and when they actually begin production, it could obviously go way higher -- I estimate high 4-digit to low 5-digit income MONTHLY at about the same time we have to worry about RMDs, etc.
I feel very very lucky right now... when I was buying land 20 years ago in Mich., I wasn't focused on mineral rights, just surface rights... then I found out I actually did own the mineral rights... and then began attending the yearly land auctions in the county for property seized from failure to pay taxes -- during the financial crisis I picked up the bulk of my mineral rights land very very cheap -- I borrowed a little money to close one deal, but paid it off in 2 years... this last bit (mineral rights leasing) was not in any of my long range plans 15-20 years ago, but now looks like it will be the crown jewel in our retirement -- eventually matching ALL other income streams combined.
But before I get too excited, I need to talk to my tax atty here, as well as my lawyer in Mich. and get real plans in place tax-wise.
And no, we are not going to go out and buy new expensive cars, etc... other than building my little place (1,200 sq ft tops), it will be retirement as usual (we've been traveling a lot) and there's always the healthcare issue lurking... in fact, someone asked me if I were offered a brand new car, what would I want? My answer was just a new version of what I now drive, and is no longer made... my wife's car was 2 yr old when we bought it a year and a half ago... I will be "splurging" so to speak on some appliances and furniture -- I'm going to take our home appliances and some of the older furniture to Mich for the new cottage and we'll replace them here.
Mostly, what all of the above amounts to is that while there are some details, etc. to work out, I no longer worry at all about our financial future at all -- in effect, we've "bought" financial peace of mind for the rest of our lives... the kid isn't too upset about inheriting a cottage and some mineral rights, but hopefully, she'll have to wait another 20-30 years to get her hands on some of it. We may "gift" her the cottage, spread out over several years to comply with gift taxes, before we die just to lock in a lower property tax -- something my grandparents did for my dad and he did for my brother, sister and me -- and then "rent" it from her, paying rent exactly equal to the all-in costs of us using the cottage...
We always told my daughter that her inheritance would be her undergrad education and whatever we might still have in Mich (not much until recent years to talk about)... obviously that's changing, but the one extravagance we might spring for is her MBA -- she's already enrolled, and has been assuming (as we've been telling her all her life) that she'd have to pay for it herself.
As I said, I just feel like a lucky lucky man... and I will never take any of this for granted because I actually worked really hard to get here, but was lucky to be able to learn what I had to do to achieve it all, and fall into a couple opportunities unexpectedly. |
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