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38 - am I on track?
Old 08-26-2014, 01:18 PM   #1
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38 - am I on track?

Age - 38
Married (SAM) - 2 children (4 and 7)
Annual Income - $167,000
Current Retirement Savings - $570,000 (all tax deferred)
Emergency Fund - $30,000
Debt - Mortgage of $270,000 and $600 car payment for another 2 years
Yearly Savings - $45,000 to 401k (including employer profit sharing)
Allocation - 80% S&P Index - 15% Small Cap - 5% Bond fund
Desired retirement age 59.5
Desired retirement income - $100,000 (in todays dollars)
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Old 08-26-2014, 01:54 PM   #2
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Quote:
Originally Posted by mark3rs View Post
Age - 36
Married (SAM) - 2 children (4 and 7)
Annual Income - $167,000
Current Retirement Savings - $570,000 (all tax deferred)
Emergency Fund - $30,000
Debt - Mortgage of $270,000 and $600 car payment for another 2 years
Yearly Savings - $45,000 to 401k (including employer profit sharing)
Allocation - 80% S&P Index - 15% Small Cap - 5% Bond fund
Desired retirement age 59.5
Desired retirement income - $100,000 (in todays dollars)
Outside of the fact that you are unclear as to how old you are...

Do you fund a Roth IRA? If not, why not?

Your asset allocation is heavy with market risk. Did you last through 2008/9 without selling?

Back of napkin numbers, assuming constant savings rate of $45,000 and 4% real (above inflation) returns, I have you at about $2.7M in today's dollars at age 59.

4% withdrawal rate: $109,000
3.5% withdrawal rate: $95,000
3% withdrawal rate: $82,000

Does the $100,000 include tax burden?

Have you played around with FireCALC?

Bottom line: you're on a good path. I'd look to bump up that savings rate, starting with a Roth IRA, then using a taxable investment account if desired. Determine if you're really comfortable with your AA. Take a look at your tax situation.

Also, determine if you're going to fund your kids' college or not - consider 529s if so.
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Old 08-26-2014, 03:12 PM   #3
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36 must have been wishful thinking - 38 is correct. We are not eligible for a Roth b/c bonus income puts us over the limit for the past few years. Bonus is very uncertain and we do not count it as part of our budget for determining income needs post retirement. $100,000 does include tax liability - house and cars paid off and kids out of college (hopefully). We are saving for college albeit modestly. Would like to be comfortable with retirement savings first. Also have a few IRAs that could be used for college if retirement outlook looks secure.
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Old 08-26-2014, 03:41 PM   #4
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I think you are looking okay due to your $45k savings rate. By way of comparison I am 42.
Married, 2 kids (13 and 9)
Annual Income: $80k
Current retirement savings: $435000
Emergency Fund/Cash Reserves: $50k
Debt-NONE
Yearly Savings-$20ish
Allocation: Same as you
Desired retirement age-As soon as the last kid is out of college-55?
Desired retirement income-$60-70k. More is better!
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Old 08-26-2014, 09:46 PM   #5
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My numbers are very similar to yours, including ages of self and kids. My AA however includes a growing portion in foreign markets though. Have you considered diversifying globally? Also I am now trying to increase the after tax portion of my NW. I have learned the importance of that from this board, and as I am hoping to RE around 55, it seems like an important key that is not mentioned in general (not ER) retirement savings advice.
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Old 08-27-2014, 05:53 AM   #6
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Quote:
Originally Posted by nash031 View Post
Outside of the fact that you are unclear as to how old you are...

Do you fund a Roth IRA? If not, why not?

Your asset allocation is heavy with market risk. Did you last through 2008/9 without selling?

Back of napkin numbers, assuming constant savings rate of $45,000 and 4% real (above inflation) returns, I have you at about $2.7M in today's dollars at age 59.

4% withdrawal rate: $109,000
3.5% withdrawal rate: $95,000
3% withdrawal rate: $82,000

Does the $100,000 include tax burden?

Have you played around with FireCALC?

Bottom line: you're on a good path. I'd look to bump up that savings rate, starting with a Roth IRA, then using a taxable investment account if desired. Determine if you're really comfortable with your AA. Take a look at your tax situation.

Also, determine if you're going to fund your kids' college or not - consider 529s if so.
+1 With emphasis on bumping up the savings rate.

Your bonuses are at least $24K because that's where Roth eligibility ends and, I expect they're much bigger than that at your salary level. I'd suggest using all (certainly most) of each year's bonus to supercharge your taxable savings account. That will create two benefits: (1) accelerate your FIRE date and, (2) add spending discipline that should carry over into FIRE. One detail on your taxable account that I'd suggest (because, in hindsight, I wish I'd done it) would be to start looking at a cash-ish reserve about 10 yrs out (CD or bond ladder), and begin to create it if interest rates are favorable. By way of example, DW and I have a cash reserve (4yr CD ladder) but, it's at today's rates..

I also noticed you have a $600/mo? car payment. That's pretty sporty (and I hope the car is too ). I'd suggest: (1) paying cash, (2) buying slightly used vehicles and, (3) moving down the sporty/luxury scale; $600/mo is MB and Porsche territory.
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Old 08-27-2014, 10:36 AM   #7
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Quote:
Originally Posted by mark3rs View Post
Age - 38
Married (SAM) - 2 children (4 and 7)
Annual Income - $167,000
Current Retirement Savings - $570,000 (all tax deferred)
Emergency Fund - $30,000
Debt - Mortgage of $270,000 and $600 car payment for another 2 years
Yearly Savings - $45,000 to 401k (including employer profit sharing)
Allocation - 80% S&P Index - 15% Small Cap - 5% Bond fund
Desired retirement age 59.5
Desired retirement income - $100,000 (in todays dollars)
I hope you are on track, cause we are similar. I'm 36 as of june, I have a 100k less saved than you, but also 100k less mortgage debt (2 7/8%) and no car payments. We are saving about double what you are this year, but we arguably earn more and have no kids. I'm wanting to retire more than a decade earlier than you, and at a lower retirement income.
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Old 08-27-2014, 12:46 PM   #8
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Quote:
Originally Posted by mark3rs View Post
Age - 38
Married (SAM) - 2 children (4 and 7)
Annual Income - $167,000
Current Retirement Savings - $570,000 (all tax deferred)
Emergency Fund - $30,000
Debt - Mortgage of $270,000 and $600 car payment for another 2 years
Yearly Savings - $45,000 to 401k (including employer profit sharing)
Allocation - 80% S&P Index - 15% Small Cap - 5% Bond fund
Desired retirement age 59.5
Desired retirement income - $100,000 (in todays dollars)
Nice work! You should be on target.
We are in a similar situation, lower income by 10% (need to work on that), three kids (7, 5 and 1.5), 39 years old and DW is SAHM.
We have a mix of Roth, tIRA, 401(k) and taxable ~$850k. $220k mortgage and similar asset allocation.

I have $60k automatic deductions for savings each year (and save outside the automatic if there are left overs...), you should be able to bump yours up, save more outside your retirement account. Look into backdoor Roths as well.

You don't mention current expenses, but they could change significantly as your kids grow older. Do you have any 529's?

$100,000 in today's dollars is $186,000 at 3% inflation 21 years from now. At 3.5% SWR, you'll need around $5.4MM. and with 8% return on investment at your current rate, you'll get there, if it is 7%, you won't hit your target.

What is your current spend? With your income, you should be able to put more away, any reduction in spend today should be able to get you into retirement prior to 59.5.

I can highly recommend evaluating your spend the last couple of years and see if there are areas where you feel like what you are spending money on is not worth it to you.
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Old 08-30-2014, 04:52 PM   #9
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Quote:
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36 must have been wishful thinking - 38 is correct. We are not eligible for a Roth b/c bonus income puts us over the limit for the past few years. Bonus is very uncertain and we do not count it as part of our budget for determining income needs post retirement. $100,000 does include tax liability - house and cars paid off and kids out of college (hopefully). We are saving for college albeit modestly. Would like to be comfortable with retirement savings first. Also have a few IRAs that could be used for college if retirement outlook looks secure.
google and look into back door Roth IRA. If your current employer allows rollover of tax deferred money from else where into your 401K and have good funds to choose from then this will open the back door Roth IRA. You can then contribute to non deductible IRA and convert it right away to Roth IRA. I learned the trick here on the forum earlier this year…there is more to it also…search and read it. I'm now putting away about 25K/year into my Roth IRA which I was not eligible/aware of it before.
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Old 09-01-2014, 05:23 PM   #10
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2020-can you expand on the process?



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Age 40 - 2017 Update
Old 01-10-2017, 10:31 AM   #11
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Age 40 - 2017 Update

Age - 40
Married (SAM) - 2 children (7 and 9)
Annual Income - $250,000
Current Retirement Savings - $800,000 (all tax deferred)
Emergency Fund - $100,000
Debt - Mortgage of $235,000 (15 years left)
Yearly Savings - $45,000 to 401k (including employer contribution)
Allocation - 80% S&P Index - 15% Small Cap - 5% Bond fund
Desired retirement age 59.5
Desired retirement income - $125,000 (in todays dollars)
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Old 01-10-2017, 02:42 PM   #12
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I notice that your savings hasn't changed but your annual income is up about $80K from the first post, while your desired retirement income has increased as well. You added a lot to your emergency fund, which is good, and $100K seems like plenty given your spending level.

I'd really encourage you to open a taxable investment account and ratchet up that savings rate. Depending on your desired withdrawal rate, $125,000 in desired retirement income requires a portfolio of $3.1 to $4.1M or higher (neglecting social security). $800K is a good start, and you've got time to get there, but...

Increasing your savings rate serves two purposes: (1) it helps control lifestyle creep which can cause your desired spending to increase which drives your required portfolio size up quickly; and (2) gets you to your number faster, allowing earlier retirement or possibly a higher spend.
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Old 01-10-2017, 02:52 PM   #13
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Agree on above. So important to maximize savings because the lifestyle creep can be a real problem. We are guilty of it in our home. It sneaks up on you!
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