My New Thread

[Magic Johnson]

Assume spending at $5,000/mo., currently. Would that be closer to $6,600 in retirement?

I need a 3 month EF asap and also 25 X spending to retire

I can work up to 20 more years, but 15 would be better. I'm a federal employee, so I don't do physically demanding work, and I'm in good health. I enjoy my job. I expect to retire with good health insurance.

Current EF is $1,115. Current 403(b) is about $170,000 (that's with what I owe my ex subtracted out).

I'll have farm rental income at some distant point in the future. For planning purposes only, assume I start getting farm rental income 5 years after I retire. The farm currently rents for about $34,000 per year, but maybe more, minus property taxes, which I would ballpark at around $10,000 per year, but probably less. There is no reason to expect that rental income will be less in the future, and it is very likely to be more.

Assume $2,000/mo. from Social Security at the age I retire.

I've never been a lavish spender, but I've also never been an austere spender either. I doubt that either of those facts will change.

What questions do you have?

[james.hendrickson]

@magic, for those who aren't certain what Michigan's PA 116 law, is you could you explain it? I looked online and the only thing I came up with is that it is a farmland preservation law (here). Also, it *looks* like the law locks in land that is used for farming, preventing its use for anything else and in return providing tax incentives to the owners. Is that the reason why lenders don't want to lend against PA 116 homes?

In other words, what's the story with PA 116?

[Magic Johnson]

I understand the basics of PA 116 very well. It's Michigan's Farmland Preservation Program. Farmers enroll their land in PA 116, and promise to not sell it for development purposes (new houses or shopping centers, etc.) A farm enrolled in PA 116 can be sold to another farmer, who promises to keep the land in farming, but that's it. The land is preserved for farming.

The farmer who enrolls the land in PA116 gets income tax credits back from the state for local property taxes they've paid. So, the local county/township gets all their money. The farmer still pays their property taxes to the local government. When the farmer does their state income taxes in February, they send proof to the state about how much property tax they paid their local government. The state credits their state income tax. It's not an exact 1:1 credit, but it's close. Also, there are income limitations. If the farmer's spouse has off-farm income and makes quite a bit of money (let's just say a six-figure income), they get no credit. If the farmer's spouse has a middle income ($30-60K), they get the full credit.

It's a state-level program to encourage keeping farm land farm land, and not a new residential development. It's completely up to the farmer whether or not to enroll. But if they do enroll, they enroll for a very long time. I'm not sure, but many, many years. It's a long-term commitment.

So say a farmer gets an offer he can't refuse. Say someone wants to buy his land to put in a casino, and offers him $20,000 an acre. That farmer has a decision to make, and he deices to sell to the casino. Then he has to pay back all of the tax credit for the past seven years. In the real world, the farmer would consider that in negotiations with whoever wants to put in the casino, and they buyer usually picks up most of the bill anyway.

But for the most part, PA 116 works, but there are ways to get out of the contract. But to get out of the contract is very difficult and takes a long time answering lots of tough questions from government officials. You can't just willy nilly decide that you don't want to be in PA 116 anymore.

My grandparents had their farm enrolled in PA 116. When my parents inherited the farm, the PA 116 contract stayed with the farm, and my parents now get the tax credit.

That's all I know for sure.

My ex-wife and I bought the house and one acre from my parents in 2012. Apparently the house was also enrolled in PA 116. (previously I thought it was just the farmable acreage, not the house and barnyard - I guess I was wrong). But when I went shopping for a mortgage this week, I found out that it was going to be problematic because the land that the house is on is in PA 116 - I had no idea).

So, I asked the clown from the shady mortgage company what he could do because the house is enrolled in PA 116. Obviously, the clown had no idea, but the question got bumped upstairs really quickly, because the clown said that I had been "preapproved with flying colors". He made a promise that there was no way he could deliver on. In my mind, the very large, very wealthy company violated the Frank Dodd Act.

I have an appointment with my real estate attorney on June 20 at 3:30 to discuss my options.

I'm guessing that there will be at least one attorney from the very large, very wealthy mortgage company who will be interested in discussing options to settle, and get this off their plate as inexpensively, and as quickly as possible, and move on with life.

All I want right now is a nice house to move in to, and I'd be really happy if they gave me some money to do some updates to the house, make sure I have no legal bills, and provide enough money that I can satisfy any state and federal income tax liability that may arise from the settlement, however large that may be.

OK, your question just forced me to do a google search. Here's what I found:

"There is good news and bad news if a lender makes a loan in violation of Dodd-Frank. The good news is that the government has not been aggressive in enforcing the Act against individual lenders. The bad news is that the penalties for violation are harsh including penalties ranging from $4,000 per day up to $25,000 for reckless violations and $1,000,000 per day for knowing violations."

So, now I know.

That's what I just found out just right now. Reality is setting in as I tap this out.

Magic Johnson has come back to reality.

[james.hendrickson]

I understand the basics of PA 116 very well. It's Michigan's Farmland Preservation Program. Farmers enroll their land in PA 116, and promise to not sell it for development purposes (new houses or shopping centers, etc.) A farm enrolled in PA 116 can be sold to another farmer, who promises to keep the land in farming, but that's it. The land is preserved for farming.

Magic super solid explanation, thank you! I thought it might be something to do with lenders not wanting to lend on property that has encumbrances. The lower level person who said you were approved is probably just a sales person/lead generation guy without a lot of experience. I'd imagine the PA 116 rule is something not a lot of lenders understand or deal with on a daily basis.

Also, if you don't mind my asking, why bother talking with a lawyer to deal with these guys? Why not just withdraw the application and go with someone else? They might be engaged in fraud, but why spend money to sue them? Why not just file a complaint with the relevant state agencies? That's usually quicker and cheaper.

[Magic Johnson]

"Also, if you don't mind my asking, why bother talking with a lawyer to deal with these guys? Why not just withdraw the application and go with someone else? They might be engaged in fraud, but why spend money to sue them? Why not just file a complaint with the relevant state agencies? That's usually quicker and cheaper"

Mainly because of the dispute with my ex-wife. I found out that I apparently still legally own the house, which I didn't know until yesterday. I want her butt out of there ASAP. We don't get along at all. I want her evicted.

[james.hendrickson]

Magic, I'm the wrong guy to be giving advice on this...because I'm divorced. And wouldn't it cheaper and easier to simply convince her to move out? Like pay her to move or help her leave the place?

I mean...usually people don't have good relationships with their former spouses, but it seems like making peace with her would be less expensive in terms of dollars and emotional wear and tear in both the short and long term.

Honestly, for me its taken years for things to get back to normal with my son's mom, so I know its a lot easier to say then do, and I thought I'd raise it as discussion point anyway.

[Magic Johnson]

I’ve been the nice guy trying to make peace with her since January. She has dug in her heels and hasn’t budged one single millimeter.

[Magic Johnson]

DisneySteve,

You are almost always right when it comes to personal finance. You live it, you breathe it, you know what you're talking about, and you back it up with fact.

I will always disagree with you on one fundamental point.

I won't buy cheap groceries at Walmart (actually I do buy quite a few of my groceries at Walmart when it makes sense, I'm not a hard-core boycott Walmart type).

But I'll also support my local hometown grocery store, Ben's where groceries are more expensive. Why? because if you're old, and on Social Security, or if you're on SNAP, that's pretty much your only choice. Plus, I like the convenience of having a local grocery store if I need to pick up something quick for dinner (or whatever).

I'll also buy my insurance from Andy Gray, and not Flo from Progressive , or the Geico Gecko. Why? because Andy's mom was my fourth grade teacher, and Andy's wife cleans my teeth.

It's a small-town thing that people from a larger community have difficulty understanding.

There are empty storefronts all over my small town, and its sad. I know it's progress, and capitalism, and low cost is always going to win, but I believe in voting with my feet.

If I need advice on other methods of building a 3-month EF, or 25X spending for retirement, you're the guy I'm going to ask.

[james.hendrickson]

DisneySteve,

I won't buy cheap groceries at Walmart (actually I do buy quite a few of my groceries at Walmart when it makes sense, I'm not a hard-core boycott Walmart type).

If I need advice on other methods of building a 3-month EF, or 25X spending for retirement, you're the guy I'm going to ask.

Actually, this seems very reasonable to me - its okay to support local small business, even if sometimes you're paying a bit more.

[LivingAlmostLarge]

DisneySteve,

You are almost always right when it comes to personal finance. You live it, you breathe it, you know what you're talking about, and you back it up with fact.

I will always disagree with you on one fundamental point.

I won't buy cheap groceries at Walmart (actually I do buy quite a few of my groceries at Walmart when it makes sense, I'm not a hard-core boycott Walmart type).

But I'll also support my local hometown grocery store, Ben's where groceries are more expensive. Why? because if you're old, and on Social Security, or if you're on SNAP, that's pretty much your only choice. Plus, I like the convenience of having a local grocery store if I need to pick up something quick for dinner (or whatever).

I'll also buy my insurance from Andy Gray, and not Flo from Progressive , or the Geico Gecko. Why? because Andy's mom was my fourth grade teacher, and Andy's wife cleans my teeth.

It's a small-town thing that people from a larger community have difficulty understanding.

There are empty storefronts all over my small town, and its sad. I know it's progress, and capitalism, and low cost is always going to win, but I believe in voting with my feet.

If I need advice on other methods of building a 3-month EF, or 25X spending for retirement, you're the guy I'm going to ask.

sometimes there isn't a walmart ( i grew up without one until they stopped protesting and allowed one in). So choices in smaller towns can be terribly limited unfortunately.

[Magic Johnson]

Does it make economic sense to buy E85 (85% ethanol gas) now that gas prices are so high?

Using E-85 decreases fuel efficiency, but I don't know by how much.

My hunch is that gas is high enough now that it finally makes up for the efficiency drag, but I'm not sure how to calculate that.

Thoughts?

Locally the cheapest gas today is $4.99, but I found out that ethanol is $4.65 today.

[kork13]

I haven't seen the math done for energy capacity vs. cost savings for the different blends of gasoline/ethanol. I'd be interested to see that though.

Meaningful to point out, though -- not all cars can handle E85 gas. It's got very different combustion properties compared to the E10/E15 (or 100% gasoline) that you normally get from the corner gas station.

I know that if I tried to use E85 in my car, the engine would likely start having problems, because the computers wouldn't be able to adjust the oxygen/fuel mix sufficiently to ensure proper combustion.

[Magic Johnson]

My truck is flex fuel, it will burn E85.

[Magic Johnson]

I’m going to buy a smaller pickup that burns less fuel.

The dealer will only give me $3,500 as a trade in on my old truck.

The idea of selling my old pickup independently intimidates me.

KBB.com says it’s worth $8,000 - $11,000.

[Jluke]

How much do you owe on the truck?

carvana and other sites may offer you more and you could use that to bargain with the dealer if you want.