Discouraged but still dreaming!

[Cruising2022]

Hi, I'm the wife unit of a young committed FIRE couple.

I'm privately employed, but married into a military pension. I'm anti-pension in general, but if anyone ever deserved pensions, it's the military. You military folks have my respect; it's not a lifestyle many would choose. You certainly work more than 20 years than most employees do in a lifetime, that's for sure.

We're saving between 65 and 75% of our gross taxable income (which isn't as impressive as it sounds because so much of military pay isn't taxed). We're hoping to have 1.5 million by the time DH retires on his pension at age 42, which should be possible if we keep up the savings rate and feed dog food to any future kids. We've taken a beating in the stock market, and we're very worried about the future but we're trudging on.

We've already gone out and picked our retirement location, and DH (the engineer) has already designed the home we'll retire in. I'm sooo excited.

 

[Coach]

Hi Cruising and welcome to the forum!

It sounds like you and your husband have a plan and are committed to saving --congratulations! That probably puts you way ahead of most of your contemporaries.

There's a nifty calculator available here -- FIRECalc. You'll find a link to it on the bottom of every page. If you haven't yet, you might try plugging some numbers in and see what comes out.

A couple of questions: is 2022 a retirement target? And why are you anti-pension? I suspect most of us here who are not pension owners suffer from pension-envy!

I'm glad you've joined us!

Coach

 

[Cruising2022]

There's a nifty calculator available here -- FIRECalc. You'll find a link to it on the bottom of every page. If you haven't yet, you might try plugging some numbers in and see what comes out.

Yup! Actually had been using it for a couple of years before I found this forum, oddly enough. It's an amazing piece of software.

A couple of questions: is 2022 a retirement target? And why are you anti-pension? I suspect most of us here who are not pension owners suffer from pension-envy!

Financial independence in 2022, and maybe a few years of working after that to get the nifty toys, if we want.

Re: pensions: All the usual reasons... I don't mind pensions in and of itself; it's just that most pensions are set up under a model that is unsustainable (unrealistic growth and projection expectations, not accounting for increased longevity, putting all eggs in one basket especially in the case of corporate pensions, etc). I'd rather pay higher salaries, increase 401K limits (who can retire saving 16K/yr?), and let the person be in charge of his/her risk than be a potential liability during hard times. but that's certainly been debated a lot!

Thanks for the welcome.

 

[militaryman]

I'd rather pay higher salaries, increase 401K limits (who can retire saving 16K/yr?)

Who can retire saving $16K a year?

Seems quite a reasonable cutoff for the Gov. to provide especially considering the catchup contributions that would makeup for not always having contributed the Max.

16k for 35 years @ 7% = $2,200,000

Most probably can.

 

[Cruising2022]

Who can retire saving $16K a year?

Seems quite a reasonable cutoff for the Gov. to provide especially considering the catchup contributions that would makeup for not always having contributed the Max.

16k for 35 years @ 7% = $2,200,000

Most probably can.

But at 3% inflation, 35 years down the road you'd have to spend $2.81 to buy what $1 used to buy, if my figures are correct.

And, IMO, even a 7% return is rather optimistic. I haven't seen much explanation of why stock prices should outpace economic or even company growth, especially as we're shouldering additional national debt. That stocks have outpaced company growth is shown by that the P/E ratio has slowly inched up over the decades; even at yesterday's close, a 13 or so P/E is still expensive historically. To boot -- I can't imagine many scenarios that doesn't cause hyperinflation or defaulting, that doesn't involve some artificial pressure to keep the cost of debt down by channelling investments in the direction of treasuries. Japan didn't implode, but they haven't grown or rebounded, either. But, again, out of scope for a hello thread!

A 5% return would yield $1445125 if my figures are correct. All the shockingly more paltry when that is only a half million in the dollar amounts of 35 years ago. Even using the 7% return of 2,200,000 that you provide, it's only $31K per year in original-year dollars using the desired-salary-times-25 rule. Liveable, but really tight...

(If I got any of the numbers wrong, don't hesitate to smack me!)

Of course, the above would change a bit if the 401K limits get adjusted up and you can always fill them up, if employer matching is included (although that's going away), and if catch-up contributions are taken advantage of.

We're really aggressive and extremely conservative savers. We have yuppie salaries, but we don't have A/C and our heat is at 60F, our youngest car is 10 years old, etc. It's a lifestyle! We do commit the cardinal sin of ordering delivery now and then, though.

 

[Rambler]

I'll agree, 16k a year is not enough. But you can also use IRAs, Roths, and then taxable accounts. Problem is that most folks don't or can't even save to the limit.

No smack, just a welcome!

R