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Which would you rather be? Joe or John January 15, 2010

Posted by shaferfinancial in Finance, Uncategorized.
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Joe and John are twin brothers.  Both financially astute.  Both made identical money in the same industry.  However, at age 45  Joe made some different decisions than John.

They are now 67 years old and in good health.

Joe’s retirement  looks like this:

5 paid for rental homes with a total of $5K in net monthly rental income. At the peak of RE values these houses were worth $1.5M, but now are worth $900K.

$1.5M of cash value in an EIUL.

Dividend producing stock that once had a value of $600,000 but now is worth $450,000 but produces $2K/month in dividends.

Social Security: $1500/month

John’s retirement looks like this:

A 401k with a current value of $2M but was once worth $2.8M.  Inside the 401K is a well balanced group of mutual funds.  He always maxed out his 401K inputs.

Social Security: $1500/month

So which one do you prefer?

Let’s look at income.

Joe’s annual income looks like this:

$60K from real estate rental income partially offset by depreciation allowances that allows a net income after taxes of $55K

He is currently taking $100K from his EIUL tax free

$24K from dividends on his stock which is $20,600 after the 15% tax.

$18K from social security which is about $16K after taxes

For a total of $191,600

John retirement income looks like this:

He is using the 4% withdrawal rule for his 401K so this year he currently took $80,000 but had to pay the income tax rate of 25% so his net was$60,000

Net social security after taxes of $13,500

John’s retirement income was $73,500 this year.

Again, whose retirement would you rather have?

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