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Hi, new member on the verge of retirement with questions

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Lilly
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Hi, new member on the verge of retirement with questions  Reply with quote  

I will be retiring at the end of 2015. To my understanding, at that point, age 66, I may continue to work with no penalty. Is this correct--my research seems to show that it is.

I bought rental properties for the sole purpose of a tax write-off on the income from my job. I had 0 deductible, with one paid off home, so I bought another, and now both (duplexes) are rented. I don't lose money on them, but I make very little. Again, the purpose was the tax write off, and of course equity.

I am confused about whether I should sell at retirement. I won't need the write off, I will pay capital gains. 1 has a mortgage. The market is still pretty crappy here; I bought the second one in 2006, and we know what happened shortly after that.

With a lesser income, I don't want the inevitable large repair when something breaks-these homes are circa 1960's. The properties will not withstand a significant rent increase.

But I am told to hang on for the rental income, which, as I said, is almost null, with taxes, insurance, water & landscaping, and repairs. One needs a roof, and one unit will probably need a new HVAC within 5 years.

Another wrinkle-within probably the next 5 years, I can expect a legacy of about $300K. After taxes.

I go back and forth on this, and I admit to not being wise in the ways of finances, although my CPA says I have been doing well with the write-offs each year.

Please throw out your best advice. Apologies in advance if I have broken any rules or customs here.
Post Sat Aug 30, 2014 3:46 am
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oldguy
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Your question about penalty if you work beyond 66 - I'm assuming that you're eligible to receive an SS pension at age 66?

Do you have holdings in addition to the real estate? stocks? a 401k? an IRA? a company pension? savings accounts? Ie, do you have to struggle during the 5 yrs before the $300k arrives?
Post Sat Aug 30, 2014 1:27 pm
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Lilly
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401, about S100k. That's it. I do intend working, just not a the high stress job I currently have. SS, yes.
Post Sat Aug 30, 2014 10:03 pm
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oldguy
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If you decide to sell one or both of the rentals, wait until the year after you retire, that way less of the profit will be subject to capital gains taxes.

If the mortgaged rental has a NonOwner Occupied mortgage rate (a rental usually has about a 1.5% higher rate than OwnerOccupied - at least mine do) you could put a mortgage on your home and use the money to pay-off the rental. You would owe the same amount of money and you would have the same tax deduction - but you monthly payment would be lower cuz the loan would be classified as OwnerO.
Other than that, it sounds like you have things well under control - you could keep things just as they are. Very Happy
Post Sat Aug 30, 2014 11:03 pm
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Lilly
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Ok, so the mortgaged home was just refinanced under HARP, which thoroughly surprised me, but it's a top tier bank, so I assume they know what they're doing.

The weird thing is that I live with someone, and have no household expenses. It's simply our arrangement, but I have no stake in his home. So that's not an option at all.

Keep things as they are? Don't sell, and roll the dice that nothing substantial happens at the rentals? I admit to being a worrier that sees disaster at every turn.

In any case, thanks, and I am in AZ as well.
Post Sun Aug 31, 2014 3:12 am
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