Thanks for the thoughts on annuities!
Was feeling a little better about my growing financial planning literacy until this convo about the tax ramifications of self-directed IRAs, etc. Oh boy. 
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Iām going to have to look up that 3.8% tax thing you mentioned. I havenāt heard of it before. Thanks? (Just another bill to worry about - LOL) If you have an easily available source that explains it, would you mind passing it along. Otherwise, google is my friend.
Thank you for all the great information, @sherpa, this is really useful to us!
Have you developed any of the land you have purchased in Washington, and if so, has it been a huge pain, or not too difficult?
Iām also wondering that if we move some money into a self directed IRA (and it looks like we can combine both of our IRA funds in there with some effort), can you keep moving more into it for the same property? It seems like youād have to be able to do that, because you donāt know how many costs are going to come up, and you canāt plan for all of them. Interesting that you have both Roth and non Roth in there. Wow, so if you had a huge gain on the property, and it was bought using Roth funds, no tax on the profit? Thatās amazing, definitely something to think about if you knew it was a high profit property.
smartasset.com has some tools on it, and has some general information on a number of areas.
Finding an advisor who is a fiduciaryā¦that is important for many who do not have a background or interest in deep diving things that and advisor is hired to do. Ethical, one one can trust, puts clientās best interest first.
We are āearlyā in our retirement, and continue to fine tune areas with our overall plans - as they relate to estate as well. We are pretty happy with where we are with our health and our financial picture, among other things. Some things one can control, and many things not. Always a paradigm change somewhereā¦
I have shared the smart asset web site with DD2 as they have home buying info/tools.
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@busdriver11 - I havenāt truly developed any land here, but Iāve come close. I have designed a few homes and apartments which a builder associate has built, Iāve sought and gained approval for a number of townhouse subdivision projects, and weāre gradually building an investment portfolio of residential rental properties.
A few years ago I happened upon a small city in Washington where land was ridiculously undervalued and the local builders seemed stuck in their ways and unable to see the opportunities in front of them. We bought quite a bit of land at the then market value, which values have roughly tripled in 4 years. Along the way Iāve had the opportunity to educate the Planning Department of a few misunderstood and overlooked ordinances in the Municipal Code. Itās been a great ride.
Yes, you can add to your IRAās to the extent your situation allows, and you can transfer any amount you choose from the IRA(s) to the LLC at any time. You just need to be careful to adjust the LLC records if a contribution by one IRA member changes the percentage ownership among multiple IRA members. For example, when we converted regular IRAās to Rothās it changed each accountās percentage ownership in the LLC. Updating the paperwork was simple, but necessary.
And yes, buying an undervalued asset with Roth dollars is the ultimate home run. Unfortunately our cheap Washington land was purchased outside of our retirement accounts. Oh, well, canāt really complain.
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Thanks, great info! I have to admit, it is still hard to find a good deal on Washington real estate. Prices going down, land sitting on the market, but really nothing that screams like itās a good deal to buy.
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Finding undervalued real estate is never easy. But then again, finding ANY undervalued investment is never easy.
Where real estate creates special opportunities is that thereās no transparent listed market price, such as with the stock market, so sellers never really know what their property is worth, and are often guided by agents who are loyal only to their own desire to make a commission.
Whenever possible, I go directly to the listing agent in order to give them a chance to ādouble dipā the commission, which somehow often leads to good opportunities.
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So much for best laid retirement plans. We bought a home in 2017 with plans to expand and remodel and then retire to it. Rental in the meantime. Well the bids to execute our plans came in WAY WAY over budget. Thanks COVID-related inflation!
So weāre selling that house and making plans to buy elsewhere. Probably Western Mass. Funny thing is, the new plan will be so much less expensive we wonder why we didnāt think of it to begin with. I think itās hard to imagine yourself somewhere totally different (weāre in CA). But once you start to envision it, youāll know if it appeals. Should have an empty nest Fall 23. Iām so ready to move & retire.
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You may know this already, but if itās a new area for you, many recommend renting before buying, so you can get a better feel for the area before making a huge investment.
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many have recommended this. We have visited the area several times and my DH lived nearby during college. We would not be happy as renters and donāt want to move twice. We have a house full of stuff, 2 pets, 3 (at college) kids. Renting just doesnāt seem feasible. We like house projects, gardening, etc.
Weāre going to take the plunge!
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I thought this was an interesting set of averages - I find it interesting that it requires higher retirement savings for WVa than for VA. However I guess there are more remote areas in VA which pulls that number down. Average age of retirement was generally 62 - 64/65. I found it interesting that South Dakota was 66. DC at 67 maybe gets pushed up a little with end of career higher paid appointments/jobs.
I also thought this was a good summary fon Retirement Income/Not Taxable
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Maybe due to the difference in retirement ages since they list the WV average at 61 and VA at 65?
I think in WV there are a lot of people that have poor health due to working conditions/life choices and poor health/diet which pulls their retirement age down. WV has a lower annual cost of a comfortable retirement. The assumptions on the expenditures (% for necessities, discretionary and savings) could be throwing things off, IDK. Alaska has a bit of disparity too with average retirement (61), with only CA, DC, and Hawaii with higher cost of a comfortable retirement. Hawaii is about $40K above the other higher end states on annual cost of a comfortable retirement - with some key reasons, with many of the comforts of life shipped in along with other reasons/cost of home ownership and rent rates. Brother lives in Anchorage and he is doing fine (he did well in his professional and with business ownership) - many just donāt have the extras we have/living arrangements we have, while some have hunting/fishing with subsidizing as well as some almost āliving off the gridā.
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Uh oh, now that I look at the rules for self-managed IRAās, I donāt know if we would be legal for this. If we bought raw land and worked on the property ourselves, that would not be allowed. Get raw land and not get a tractor for my husband to clear trails? Not happening. It looks like we have to hire people to do all work on the property, and canāt use it for anything for ourselves. Maybe weāll have to wait and use this for a property that we wonāt have anything to do with, but weāve always managed our own properties.
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@busdriver11 - Unfortunately, thatās correct. Anything in a retirement account needs to an āarmchairā investment. You could hire someone to cut trails, and tell them exactly how you want it done, but you canāt actually do the work yourself. Another reason not to put rental property in a retirement account, unless you want to hire a professional manager.
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Dang, then, for this specific property , we may have to hold off. If we get something out of state then that would be a different story. The self directed IRA sounds like a great deal, but for do it yourselfers, apparently not.
We met with our financial guy this past week, and we have two annuities that mature this year. So because we are 66 and will not need those funds, we believe we are going to enter two 10 year annuities - have the financial guy go over it with the senior guy of the group (who was our financial guy since 2013, but with growth and responsibilities of the group has us with this newer guy) and will get in this week for paperwork. Our equity accounts with them are bouncing back, as is our 401k that I/we manage.
We are moving some more money from 401k into Roth IRA and paying the taxes - taking $30K with $25K going into Roth IRA and $5K going to taxes like we did last year. But will do this after we do our 2022 taxes to make sure this is a good thing for us. Reducing our taxable retirement funds so when we take RMDs, we are at a better place with the taxes.
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If I may ask, what kind of yield are you getting for the annuity? Why not just invest into T-bonds?
We are drawing off the annuities (or at least some of them) which has that feature that T-Bonds does not. And we are not in bonds.
āAnnuities are contracts with insurance or financial services companies that provide you with reliable income in retirement in exchange for one or several payments in the present.ā
One (taken out in 2021) is 6 year Fixed Index Annuity with participation with S & P 500, Russell 2000, and a small amount with US Target Sectors.
One is 12 year fixed indexed annuity (taken out 2015), and another with the same company taken out in 2018, also 12 year fixed indexed annuity. These two have an initial strategy option and index (selected for 3 years) - with initial equity indexed allocation, initial declared rate allocation, initial declared rate, and initial strategy spread.
We will find out the details on the new annuities when we meet with Financial Advisor and go over them.
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