10 year plan. Can it work?

[Pirate]

Here is my dealio.

2019 is my retirement date, I will be 52.

I will get $48k annual pension for life, with some periodical COLAS (pension is one of the last defined benefit plans)

House paid off.

$200k Deferred comp 457.

No car or rv payments. Looks like medical insurance will be a big cost.

Based on this info. it looks like all will be well.

What do you guys think?

 

[REWahoo]

Based on this info. it looks like all will be well.

What do you guys think?

What does FIRECalc say?

 

[Frugality_of_Apathy]

What does FIRECalc say?

The median household income is $50,000 with a mortgage car payments and 2 kids.

You'll be fine as long as your company doesn't go under and social security doesn't run out of money.

I don't see why with a paid off house you shouldn't be able to save far more than $200,000 in the next ten years.

 

[F4mandolin]

I agree with Frugality....it seems like you are making a decent amount of money....no reason seen not to save more than that over 10 years. If I could go back 10 years......what I know NOW....damn hind sight....

 

[deepc]

Based on the info you provided, you'll PROBABLY be ok. However:

Medical/Dental coverage will take a big chunk, maybe 10 pct?
You still have to pay taxes, another big chunk, like 15-20 pct.
No house payment does not equal no house cost. We figure $500 month maintenance (realistic, considering long term amortization of big ticket fixes like roof/furnace and daily nuts/bolts/maintenance), $200 utilities and on the way up, taxes, insurance. Figure at least 25-30 pct of the pension.
Maybe no car/RV (congrats on ridding yourself of $8k annual per car cost) but you still have transportation costs (bus pass around here is $660 annually).

Since you have time, be brutal in documenting your true expenses. This is where you find the $57 monthly phone/internet bill, the $40 a month in cups of joe, and such that all bleed you slowly.

Last thing, I've found that my costs in retirement have actually gone up in ways I didn't imagine. Coffee? Buying twice as much now that I provide my own coffee mess. Electricity? Almost 25 pct more just because I'm around a lot more with lights on, coffee going, bread baking. If you're a true LBYM'er, then from my experience retirement does not bring with it any cost savings. Same for long deferred house projects and such that I finally got around to doing--not buying that lumber was a definite cost savings that bit the dust.

 

[Pirate]

I agree, more is better, however trying to save for college, car, house down payment and wedding for my daughter.

Pension should be solid, unless the county I work for collapses, but she is very solid, 1 of the very few counties who gave a raise this year and actually hired people. Has a history of being solid.

 

[Pirate]

Deepc I think your approach is right.

Since this is a MAJOR step I need to make sure the cat is fat enough when I skin it.

The economic crisis woke us up, we started to buy wholesale or less or FORGET it.

Tho I do miss Texas ROad house and Salt grass restaurants, I am learning to live without them.

Wife is going back to school to get her dental hygenist rating, a good part time career to have during retirement.

I COULD work longer at my job, however 22years is long enough with what I do and see.

And yes Im keeping my Rv! Ha!

 

[Maurice]

Is that 48k in 2009 dollars or in 2019 dollars?

That could end up making a big difference.

 

[Pirate]

Yes thats 2019 bucks.

And if your wondering who the pic. is, its AL Capone. My grandfather used to work for him.

 

[Rustic23]

Did I miss the point where you said what your annual after tax outlay was, or was going to be? As there are folks on this board that get by on less than $30k then $48 sounds good, or you could by like sofl mom and need between $150-$200k a year. Now I don't think so, as with all you have paid off and no debt. But you could also plan on being a world traveler, and have a curable but extremely expensive health problem in the family.

So for me, without both sides of the equation, it is like asking 'how long is a piece of string' or 'is this string long enough'

 

[Pirate]

I wish I had $200k disposable as she does.

$48k a year, $10-12k a year draw from 457 account.

Then when 62 we will get another $3k a month from SS. (No Im not waiting until 67)

My plan is to rv a few months a year, no europe for me.

My parents barely get by on $2200 a month. But they are happy and still can go rving also.

 

[Maurice]

Yes thats 2019 bucks.

I think its very hard to answer your question now, then. 48k in 2019 could end up being worth 10,000 in today's money, in which case things would be pretty tight. Its too early to tell, I'd say.

 

[Pirate]

Unless we end up in a nuclear winter, I do not see things changing to that level, nor have I read anything to indicate that.

 

[Maurice]

I agree that 10k is an extreme number, but look at the debt bubble and monetary expansion we're experiencing. The risk of inflation, even significant inflation, is very real.

If we were to average 7% inflation over 10 years, which is hardly unthinkable, that would erode the value of that 48k by half.

 

[militaryman]

If we just pick a random historical timeframe (1995-2005) 48,000 would devalue to $37836.10 during that time.

So I would say even an average inflation situation will see a devaluation of 21%

However take a period like 1978 - 1988 and the 48k is worth $25562.33 Down 47%

Worth considering given todays economy and unprecedented national deficit spending levels....

http://www.westegg.com/inflation/

The big unknown in your equation is Health care

 

[Maurice]

Personally I wouldn't use 1990-2005 as a guide. Greenspan in his book makes a good case that those years were unique in terms of very low inflation worldwide.

And then came this:

 

[militaryman]

I agree, a 21% devaluation is the minimum I would count on and 50% is about the max. unless there is a meltdown ..

I think somewhere in between......

Perhaps count on the 48k being worth 31k in buying power in 2019

 

[Rustic23]

I would look on the high end. With the money being thrown at the economy this year, then three additional years of spending, not a political statement, but my assumption is congress will not stop doing what it does, spend, I see nothing that will stop soaring inflation.

 

[Pirate]

Wow perhaps we should all fly to Sweden for some kevorkian style relief.

Barring a nuclear winter, we will recoup and thrive, history does repeat itself.

 

[Bestwifeever]

Well, you did ask what people think. So now you know.

 

[Pirate]

You are correct I asked.

And I do appreciate the detailed input I got.

 

[militaryman]

You are correct I asked.

And I do appreciate the detailed input I got.

You don't disagree that the realistic range is between 20-40% devaluation, right? I mean I cannot think of many ten year periods that would be less than 20% ....

 

[Pirate]

I didn't realize this before coming here, I understand now, its bitter medicine however its best to know now so I can prepare further for D-day 2019.

 

[haha]

Unless we end up in a nuclear winter, I do not see things changing to that level, nor have I read anything to indicate that.

First, this is a private company, not the federal government. The feds would bleed your company to pay their COLA pensions, but your company cannot return the favor. So IMO the $48,000 gets a 25% haircut just on risk.

I disagree with others who say that a 7% pa inflation is the high limit to consider. I don't think we can with any real confidence know what the high limit might be. To predict the current mess would have taken some wild off-the-charts guesses as to what might happen. The next 10 years will likely be no different in volatility, if not necessarily in outcomes.

I would not want any fixed nominal promises from a private company, unless they could be bought at a very meaningful discount.

I would not want to put numbers on it, because I am not counting on it, or bidding for it. But this is how I would look at the situation.

And don't forget, this is totally non-diversified. This is not a 1/10 part of your retirement, from what you have said, but a large hunk. We have seen some spectacular failures lately from non-diversification. They are more or less unpredictable.

Ha

 

[Pirate]

I would be more concerned about the pension if it were private, however its a large county, that do to its base has always been bullet proof to economic issues, ie no layoffs, no budget trims.