Financial Decisions

Updating our financial plan annually has become much easier since the major overhaul in 2014 when Karen and I decided our future was going to be in an RV. It was encouraging to see in print where we had made quit a lot of progress over this past year. And there were a few decided and pending decisions I can highlight for your review and input. If you’re really into the topic, just go to the blogs financial category for past thoughts. I’m happy to report we are still on track for my “retirement” date of November 1, 2019. Actually, it might be the last day of October, so I can setup retirement benefits to begin on the first of the month. Here are a few comments regarding our plan as it stands today:

Be Conservative

Keeping estimates reasonable has been in our plan for not only estimated expenses, but also income and the value of assets we are selling. I know our current effective income tax rate is lower than what I’ve estimated. I’m still planning for federal and state taxes at the same rate as during our “working years”.  I’ve included state income tax among our expenses knowing we will domicile in a state with none.

Other examples of being conservative has been using the lowest Kelly Blue Book price for what our current automobiles can be traded in for at a dealership. Another is after selling property through Craigslist, or wherever, I know the price we get will be lower than we might think. To that end, I’ve estimated household goods very low (I think) to include tools, yard equipment, guns and electronics. And I’m betting most of our furniture, clothing, rugs, artwork and such is relatively worthless.

Make Decisions Earlier That Benefit the Future

We have sold off and banked the money for more expensive property as early as possible. Although their book value was not much, the extra truck and boat went sometime ago. Both were maintenance hogs and it’s nice not to be paying property taxes and insurance on them for what would be our final two years or so before moving on. Next to go, and soon I hope, will be one of our two remaining cars and a motorcycle. Months before any of the proceeds are used in buying our truck for travel.

We all know healthcare expense is the number one concern for us pre-Medicare retirees. Karen and I decided to max out the tax deferred contribution to our Health Savings Plan which is $6,500 annually in 2018. And we took advantage of the $1,000 extra you can put aside for those who are 55 or older. Hopefully we will have a decent balance in the account once we hit the road. Does not sound like a lot of money to some. But on my wages, it is. Because of reduced expenses elsewhere it was made easier. I even called the cable company and told them I’d be on a fixed income (someday) and asked it they had any deals. Saving $40 or $50 dollars a month here or there makes a difference over time. No worries, we are still enjoying life and really don’t have any financial concerns. Not because our income is way out there. We became debt free last January when the house was paid off.

Friends at work are retiring off and passing on what they learned. One figured out that our retirement plan is based, at least in part, on the two highest years of salary. So, he suggested to skip taking the overtime pay and ask for comp. time which we are never expected to use believe it or not. Being paid for all unused sick time and comp. time the final year will significantly increase the final years earning and hence, the amount retirement benefits are figured against.  Seems strange work will be paying for those hours I earned years ago at the much higher current salary rate.

Don’t Procrastinate When Big Decisions Have to be Made

It would be hard to tell that Karen turned 62 but she did.  And we decided it was best for her to start taking her social security benefit. I’d be happy to discuss the reasoning behind this with you in the comments section if you’re interested.

In August I’ll have to look at the pros and cons of receiving an early pension from a past employer. That decision is on my calendar for the day I’m elidable. We planned on taking it in November of 2019 anyway. But when one micromanages finances, even 16 months can make a difference in the decision process.

Not having delayed estimating what it will cost on the road I hope will prove to be beneficial. And perhaps even more importantly, knowing the cost could be higher the first year compared to years after. Karen and I decided to fund a travel/reserve account. In the past we called it our safety net in case we lost our jobs.  We decided to compromise between what she wanted to do and what I wanted to do. So we included in our financial plan to have the equivalent of four months expenses rat holed away on top of the additional $7,656 our first year of travel will cost compared to the second.  I’d suggest not waiting to decide what you need to save. Nor just assuming it should or could come out of the proceeds of something you sell – like your house. For us, it’s been a little easier to save as I have a part-time job that only requires 10 hours a week of my time. Not that the hours, on top of my day job, don’t suck. I’d not have the positive attitude about the extra work if it were not for knowing our traveling lifestyle is not far off.

For now, we also made the decision to purchasing a 10 year life insurance policy rather than taking a reduced pension that has surviving spouse benefits. I say for now because I’ve only shopped for term life insurance policies online. If the actual prices come out different I might change my mind. Again, that’s a big decision we can discuss in the comments section if anyone is interested. Simply put, the life insurance is cheaper per month than what we lose with a reduced pension benefit. And we have other assets should one of us croak earlier than the other.

Truck and Trailer Budget is Huge

I’ve kept our budget for the rig the same as it’s been over several updates to our financial plan. For those of us who are not “wealthy” the cost sure seems to be huge. Perhaps because as we get older it seems like stuff costs a lot more. It’s easy to overspend, thinking this could be the last ride of one’s healthy life. And when we first start researching it’s possible we think we need to spend more.

As our expectations of what we could or should spend have come down, the budget stays the same. I suppose this is another example of being conservative, believe it or not. I’d rather over-estimate and spend less. Just because the bank account will be fat from selling everything and increasing savings because our expenses are now less, does not mean it did not take a lot of effort and time to accomplish saving up that much. Not to mention the truck or trailer will be worth less than half of what you paid for it when you decide to sell it. Can’t get that money back without an honest job. Reading about other’s travel experiences in the RV lifestyle or meeting with them in person really has helped to gain a sense of what is important about it all. I’m planning to come in under budget which will perhaps be an excuse to have spent that much:)

Know-it-all’s Should Listen to Other Opinions

Thanks to Karen, our house is worth more.  At least more than business major/financial savvy me thought it was. No, we have not had a real estate agent appraise it’s worth. And no, we have yet to put it on the market where it could sit for months. The house is in a unique location and agents tell me they are having a hard time even getting enough houses to sell (listings). Karen took a look at what I’d valued the home at for the purpose of planning. She shot a new number at me that know-it-all me thought was at first ridicules. Then I found even more ridiculously prices houses in the general area that don’t have acreage to go along with them.  I know she will prove to be right. But, other than adding in the cost of a new sewer connection to the city system, I barely increased the estimated value in our financial plan just in case.  We will make sure and use something closer to Karen’s number than mine once we meet with our real estate agent. Damn, things just seem so much more expensive today.  Hay, another reason to justify the RV budget!

Do you have other opinions to offer?  Such as when is the best time to put it on the market? Should we allow the agent to expect 6% for the fee to sell when we are not buying another home afterwards? Fortunately, we have already completed a few major upgrades to the 16-year-old home. And Karen will finally be getting the new carpet she has wanted replaced 10 years ago. I’m planning to finish up the outside painting and landscaping this season. While next winter (our last here!) will be spent on inside repairs and heavy cleaning.

Plan Ahead – But Maybe Not Too Far

If you have been following this blog for long you already know our financial plan includes an exit strategy for when we come off the road. I’m still satisfied with the decision to estimate our time on the road to be six years for planning purposes. As well as our plan B for income which is to make use of retirement accounts or rely on being young enough to go back to work.

After crunching all the numbers again this year, I’m a bit more comfortable with the funds we are leaving behind for a new home someday. Maybe that number will be larger as Karen opened my eyes to the potential value of our current home! One thing for sure that has worked out was deciding back in 2014 to dust off an older financial plan and review it every year since. I know other’s have made the move to fulltime RV living with only a few months of planning. We will see how that works out for them. Or maybe without realizing it they amassed the funds to do so over more years or with a better paying profession. A couple blogs I am reading include some scary financial stuff I’d not be able to cope with.  But maybe those folks are younger and yet to move through the years where they can achieve their maximum financial potential. But spending your last X dollars from your 401K plan to continue the journey is, well, not to call names – stupid.

I took a look at the portion of our financial plan that included a timeframe beyond just simply what we had to spend once we come off the road. I actually started to consider how that money could be spent, such as renting a place while we wait for our truck and trailer to sell. Or maybe we could get a small loan to buy a new car, paying it off with my social security check. Well that’s also stupid. There are simply too many variables to consider that far out. I think I’ll just stick with the advice we were given by another RV full-timer. That is make a deal with Karen to give the other at least six months’ notice when they are ready to come off the road. Then we can plan the next journey from there on.

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15 thoughts on “Financial Decisions

  1. Lots and lots of great stuff here, Mark! I’ll chime in on a few things that you two might find helpful.

    If possible, try to have your decision as to where you are going to domicile made when you retire. For tax purposes, it would be helpful to you if you declared your domicile in your new state before December 31, 2019. So wherever that is, make that state your first trip. Don’t let Missouri tax that pension any longer than you have to. I would even do it earlier, unless your employer has a residency requirement. That would eliminate having to change addresses twice, should your house sell before you retire (which I assume you hope it does).

    On selling the house; I suggest having your rig ready as early in 2019 as comfortable, weather-wise. Spring is always the hottest market to sell a house. Don’t let it drag into summer vacation season, if possible. We received three offers at our first showing the weekend before Labor Day. It remained listed until the accepted offer was finalized, and the Realtor said the interest dropped off to nothing after the holiday. The economy is doing well right now, so the sooner in 2019, the better. If possible, find a campground near where you currently live so you can set up a new (temporary) home base to work from for the transition time.

    On that transition time: as a fellow planner, I will point out that a lot will be happening quickly that may get outside of your comfort zone. Keep your eyes on the prize and don’t sweat the details. You may have to give things away that you thought were worth something, or accept an offer on your place that might not be perfect. In the end, you will be living your dream…and that is all that matters.

    Lastly, I totally agree on not planning your exit strategy in detail. Have a general plan and keep it loose. We have an idea of what we will probably do, but we don’t have any plans on when that will happen. There are variables that play into that decision that may not even exist yet, so why even think about it. The six month plan is an awesome idea. Before that, put it out of your mind and go explore! 🙂

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    • Thank you for taking the time to read everything through Jim. Great comments – that’s what I was hoping for.

      We have a local campground picked out for longer stays. Our property looks the best in the spring so I was guessing putting it on the market in May. Figured I’d call the real estate agent way before that. Fortunately, I can leave work after a 1,000 hours into the work year (July) if necessary but I’m still not planning on that.

      I’ll make it a point to setup our mailing service in advance of retirement. Initially Karen wants to go to Tennessee to visit family, then on to Texas or Florida depending on which state works best for our domicile. You made a good point to get the domicile setup before year end.

      I’m glad to have at least figured our exit-strategy to at least knowing what our finances should be. That way there are no surprises as to what we should be able to afford. Going with the flow is a new concept for me. But I know it is the healthy thing to do.

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  2. Great post. Agree with everything Jim said also…. Who knew selling off your stuff was so much “work”. Between sprucing up/repairing the house, selling stuff on ebay, our jobs, and all the routines of life…. we are frequently just worn out… lately. Jim’s certainly right about being outside of one’s comfort zone especially when things pile on and we have had our share of tension because of it. (just keep telling ourselves there is light at the end of the tunnel.)

    I also agree with “rat-holing” a reserve. This untouchable cash horde is vital for peace of mind. We will not have to touch our 401k, IRAs except for RMDs once we turn 70…. Tapping out those funds to fund this dream is as you say, well…. I’ll just say, it is not on our radar as an option.

    As for our S&B… We may end doing as Jim suggested, temporarily relocating to a local RV park until we are both completely ready to begin should the house sell quickly.

    Planning one’s budget conservatively on the income side and higher on the expense side has always worked for me. I like pleasant surprises and being prepared for the worst when it comes to money. “Found” money at the end of any budget reconciliation is always sweet. Running short just sucks.

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  3. I totally agree with Jim. Set up your domicile / mailing address months in advance and spring is the best time to sell the house. Once the house sells, move into a RV Park somewhere near work and start living in the RV. Once retired, you’ll be comfortable with everything and ready to roll.

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    • Ingrid,

      Somehow Karen and need to figure out how to sandwich in several of weeks vacation our last year here in Missouri. Figure we will take a few shorter trips closer to home to get the bugs worked out. Karen says she would have no problem staying with the dogs in the trailer while I’m at work, sometimes for extended hours because of the nature of the job. I could see life getting a lot simpler in the local RV park compared to trying to stay up with a sticks and bricks home, extra cars and such.

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  4. Love your blog. Chasing the same dream. Listed our house this week. I had expected to try fsbo but realtor suggested price $40,000 more than my smart guy me was planning to list for. If he is right he will pay for himself and do all the work. I made him contract to give me rights to all the pictures including drone shots so if it doesn’t sell this year I can use his work and try fsbo at lower price later.

    I see several 2017 new ram 3500’s on lots still. Have considered grabbing one of them if a steal. Think the depreciation hit later is worth buying an already 1 year but “new” truck? Also, am considering buying a tradesman version that is fully optioned. They seam 5-7,000 cheaper than same options of a big horn or other label. Thoughts?

    Appreciate all your sharing. Ken

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    • Good luck on the home sale Ken.

      Hay, if you can live with a Tradesman edition, I don’t think you could do any better with any other truck for the price. Especially as you can get the cloth seats in a Tradesman.

      I’ve been trying to find a slightly used Laramie/Lariat with most of the options I’d like. So far have not found one anywhere. I’ve always been able to buy a one year old vehicle with all the bells and whistles for a lot less than new. I’m starting to think these big expensive trucks hold their value for the first couple of years.

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  5. We are on the same timeline to retire and hit the road. We are looking for the pick up truck now and then onto the fifth wheel. So what made you decide to take Karen’s social security now instead of waiting? We have decide to take one of ours early and wait on the other. Of course if we really need to collect earlier we can but hoping we can wait on mine. We will see. We are both so excited about retirement and hitting the road. Thank you for all the great information.

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    • Hi Chris, assume you already have a good idea of what fifth wheel you guys are going for to make sure the truck is sized correctly..

      The decision on Karen’s social security was an easier one because she is a few years older than me and my social security is much higher than hers. If I die before her than she can take my benefit at the higher amount. That’s probably the best of several reasons.

      Mark

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      • Hey Mark. Yes we know the fifth wheel we want just going to wait a little longer to get that. We have already sold the house check, sold, donated or given away tons of stuff check, we have the rest of our checklist as to what and when we need to do it. We have our countdown on. LOL. Have a good week.

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  6. Hi Mark. I’ve followed your blog for a long time now. Have really enjoyed your research and thoughtful planning. My husband and I also have the dream to go full-time someday, but the kiddos are still in high school so we have a ways to go. I’ve bookmarked several of your pages, though, and refer back to them for my own planning so thank you for that! 🙂
    Anyway – I’m a realtor in the Kansas City area, so thought I’d chime in on your timing. The market starts getting pretty hot early March, so depending on how long you’d be comfortable in your RV you could list it anytime after that. I’ve seen homes with acreage go very quickly (one day) and I’ve seen them sit for a couple months depending on the “uniqueness” of the property. I’d recommend getting it on before the end of June (April and May would be prime). As for the 6% commission, I would definitely recommend budgeting for that. As I’m sure you know, the buyer’s agent gets half of that, and the listing agent’s broker gets a good % of the remaining 3%. For there to be a marketing budget for your listing agent, they’ll need the full % to work with – especially since they won’t have a double-sided deal to cushion their budget.
    I’ve loved watching your timeline get closer and closer and am very excited for you and Karen!

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    • Thank you for the real estate advice Tia. Sounds like we better get all the outside stuff done in preparation for the sale this spring/summer/fall. Then try and finish up the inside over the upcoming winter. I’ll plan on that 6% commission and understand as there is no second sale (us buying) then that does effect the relator. Karen and I have talked a lot about having to live in the fifth wheel short term if the house sells before I retire. We found a place or two we can park the trailer if that happens.

      Hope you guys are able to make the move to fulltiming when the time is right. Once we get on the road I’ll make sure to report back what worked and what did not work in terms of planning. The past 3.5 years has gone very quickly with that being how long ago we looked at this seriously. I can tell you, once we made up our mind things were never the same in terms of how we viewed our current home, job ect…

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  7. We are looking forward to seeing you in the fall of this year or probably next Spring. It is too early to plan our trip. I am hoping that you will have your trailer and we can spend a few days camping together. In your first yearly budget, you outlined a monthly cost for camping. But what I haven’t seen is an in depth look at all of the camping plans available out there, which can help minimize the monthly costs of camping. In our first year we bought two zones of Thousand Trails for our winter traveling. After buying into Colorado River Adventures we got a Coast to Coast membership for a low annual fee as part of our contract. We did not renew the Thousand Trails plan.

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