Target 2022 Retirement

[BGH1]

Hello everyone, I am 52 and my wife is 48, we have a 6 and 9 year old. I am targeting 60 for retirement. Here is a snapshot on our financial standing.

50K savings
280K in 401K's
830K in IRA's
530K in taxable accounts
113K in stocks

total 1.8 M
plus 435K house paid off

Over the next 8 years we plan to continue to save agressively, start educational savings plans for kids, and I am cuurently working on a budget to determine what our living needs will be. I anticipate having the opportunity to purchase company medical insurance after retirement, but not sure on cost.

My advisor is running a Monte Carlo similation to determine probability of money lasting (based on historical data, I know this is a downfall) based on starting portfolio, spend rate, investment, etc...

1) I am looking for an excel based retirement budget templete, any ideas?
2) Any advice on company provided medical insurance cost compared with going it on your own?
3) Any tips you can provide?
4) Thoughts on Monet Carlo simulation?
5) Is it too early to start a countdown? Ha

Thanks in advance for any and all advice, I look forward to learning a lot on this board!

 

[treeofpain]

Let's just say that there are many, many scenarios where you could retire right now.

 

[heeyy_joe]

Well done, plan now. Fidelity has a good retirement income planner that includes a budget worksheet.

 

[MBAustin]

Welcome and congratulations on planning ahead.

I'm not one for a lot of specific advice, but the biggest success factors are picking and sticking to a solid asset allocation (don't try to time the market), and being a low-cost investor.

Have you tried Firecalc?

 

[wingfooted]

biggest success factors are picking and sticking to a solid asset allocation (don't try to time the market), and being a low-cost investor.

?

+1. You are going to need a healthy equity allocation in existing savings to make it in eight years with $3MM+ investable net worth. And with two kids plus the wife and relatively early retirement age - $3MM would be a minimum target.

So much will depend on how those investments pay off in the next eight years or whether you get stuck in various permutations of one more year scenarios (like many of us on this board).





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[aaronc879]

+1. You are going to need a healthy equity allocation in existing savings to make it in eight years with $3MM+ investable net worth. And with two kids plus the wife and relatively early retirement age - $3MM would be a minimum target.

How did you come up with $3MM as a minimum target? I don't see where the OP states an expected retirement budget. Even with just a 3% WR, he would have $54K/yr to live off of if he retired now with $1.8MM plus SS later on. If they were willing to live on the median income they could retire now. No reason they NEED $3MM.

 

[pb4uski]

I like Quicken, especially Quicken Lifetime Planner for retirement planning. You can include your current assets, future savings, kids college, etc. Very easy to use.

I found that buying individual health insurance was more affordable than COBRA coverage.

 

[BGH1]

Thanks for the replies!! I will check out the Fedelity budget suggestion, as this will determine if we do need 3M versus 2.7M etc.. I think this piece is critcal (planning). I am all for the 3M, but you never know if the market is.

The major expendatures I will need to factor in is the medical and travel. I plan on allocating a set amount each year for travel, and will ballpark the medical until I have firm numbers. I will use baseline data (last year) to generate the budget numbers with some alterations based on lifestyle changes (less clothes buying for work versus increase in electricity use).

Then of course we would likely need repairs, a car or 2 along the way, so yes a lot of planning....

 

[wingfooted]

How did you come up with $3MM as a minimum target? No reason they NEED $3MM.

Two kids ages 6 and 9 - not cheap and looking at a 15 to 20 year commitment. On $54K a year ? Admittedly, I view resources as not an early retirement extreme situation.


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[NgineER]

As far as money running out, it all depends on your withdrawal rate and investments.
Setting a budget for yourself will be key, and keeping track of current expenses to see how they stack up against your budget. The general 80% of preretirement advice is not necessarily true for everyone.
Use the search function on the forum and you'll get a good idea of major buckets to have in your budget, but taking any budget spreadsheet is a good start. Track. Urgent expenses for a year or two and then start thinking about how they will change with retirement. Travel, college, fewer work clothes...

Monte Carlo simulations are good, and using firecalc as was suggested is just one of those that you can do yourself. I-orp is also an interesting retirement calculator. Just seRch for those terms in google.

A lot of people here handle their investments by themselves, paying advisor fees is just an added annual expense that prevent you from retiring early. Vanguard for example have free advisor services once you have enough assets with them. I don't know about your advisor situations, but what he is offering to do for you with Monte Carlo simulations is nothing special or hard, you'll just have to educate yourself a bit, which might enable you to pull the plug earlier, or pull the plug with more confidence once you do it.

 

[BGH1]

Thanks again for the information. I have no intent to retire now with a 54K annual income stream, we are saving more than that each year for retirement.

So between the savings over the next 8 years, additional stock each year, and portfolio performance over 8 years I am targeting being north of 2.5M possibly around 3M by the time I am ready to retire.

Now I am off to work on the budget.

 

[2B]

I don't see $3MM in 8 years to be outside the range of possibilities with decent market performance and strong savings. I suspect that the continued savings will soon be dwarfed by market performance (both up and down). You appear to be well on track and I agree with an earlier comment that says you could easily retire now depending on your spending.

I'll mention one thing that nobody has hit on yet and that is the "advisor." You didn't mention if this was a fee only or someone that gets a percentage of your assets. You can find many threads here arguing that you can easily become your own advisor and save yourself a large amount of money. Numerous studies have shown that a diversified portfolio of index funds consistently outperform the vast majority of advisor driven portfolios. If you are paying this guy a fee to put you into actively managed funds, you are being doubly hit. Care to provide more info on your advisor?

 

[aaronc879]

Two kids ages 6 and 9 - not cheap and looking at a 15 to 20 year commitment. On $54K a year ? Admittedly, I view resources as not an early retirement extreme situation.

I realize that the majority of the people on this forum are in the upper middle class and are able to spend more than $54K/yr and STILL save 10's of thousands a year but people need to remember that the majority of people don't make that kind of income. I know very few people who currently have an income greater than $54K/yr and are still raising happy and healthy kids. When I was growing up my family and the majority of families around me were living on less than the equivalent of $54K/yr in todays dollars. Raising kids is as expensive as the parents make it.

All that being said, if the OP likes his job and what's to live an upper middle class lifestyle for several decades then he will need more than $1.8MM so he should continue working. Nothing wrong with that but it's not the only option.

 

[2B]

All that being said, if the OP likes his job and what's to live an upper middle class lifestyle for several decades then he will need more than $1.8MM so he should continue working. Nothing wrong with that but it's not the only option.

I'm not sure if the $54K is his expenses with/without taxes and medical. I suspect that if he can get retiree medical than he also has a pension to go along with his SS.

Ignoring all my rambling, a $1.8 MM portfolio can support a $72M lifestyle using the classical 4% SWR. Any pension and SS only sweeten the pot. Go to $3MM and the OP is up to $120K plus extras. I'd say he's already at a decent financial point but will only look better as time goes by. Heaven knows there are many people on this forum that have enough to retire and are still working for pay for one reason or another.

My father raised 5 kids on a mailman's salary. We didn't know how little we had until we were in high school. Only my youngest brother got any help with college.

 

[aaronc879]

My father raised 5 kids on a mailman's salary. We didn't know how little we had until we were in high school. Only my youngest brother got any help with college.

Up until I was around 15 my father supported a wife and 2 kids on about half a mailman's salary. Then he became a mailman and finally made a decent income. 20 years later he's retired and living pretty well financially. My brother and I didn't have private school or designer clothes but we had everything we needed including a loving family that was around a lot.

 

[BGH1]

I too came from a low income family, and it satisfies me to have worked hard and had a little luck to get where I am today, very few have. I am happy to hear several of you have had the same experience.

I have kept one of my 401K rollovers and present 401K (of course) to myself, and I am tracking performance against my advisor when I meet with him (he knows what I'm up to). He gets paid a percentage of the portfolio he manages. I appreciate the challenge on this, and am evaluating this. At the next meeting I will check in again, compare performances (after fees on his side), and determine if it makes sense to continue to pay out for the services.

 

[NgineER]

Yes,

do keep close tabs on the expenses of your advisor.

I just did a quick calculation on your numbers from above, don't know what you are contributing each year, but it is more than $54k as you stated.

8 years of compounded interest at 8% (high I know...) from $1.8MM and $54k contributions --> $3.95MM
If you pay your advisor 1.5% (don't know how much it is...)

8 years of compounded interest at 6.5% (8-1.5%) from $1.8MM and $54k contributions --> $3.56MM

That 1.5% fee turns into 10% less in your final portfolio. That is just in the accumulation phase.

 

[2B]

I have kept one of my 401K rollovers and present 401K (of course) to myself, and I am tracking performance against my advisor when I meet with him (he knows what I'm up to). He gets paid a percentage of the portfolio he manages. I appreciate the challenge on this, and am evaluating this. At the next meeting I will check in again, compare performances (after fees on his side), and determine if it makes sense to continue to pay out for the services.

The correct comparison is to look at the performance of a portfolio of diversified index mutual funds. You can easily find multiple examples that you can compare with past historical performance of your advisor. Your 401k may be filled with managed mutual funds that typically won't outperform an all index portfolio.

One of the curses of posting here is that you will have multiple people tell you to ditch your advisor. It's costing you money.

 

[Jay_Gatsby]

The correct comparison is to look at the performance of a portfolio of diversified index mutual funds. You can easily find multiple examples that you can compare with past historical performance of your advisor. Your 401k may be filled with managed mutual funds that typically won't outperform an all index portfolio.

One of the curses of posting here is that you will have multiple people tell you to ditch your advisor. It's costing you money.

And we could revisit that topic ad nauseum. Seriously though, only the OP can decide whether the advisor if earning his/her fee. Perhaps tracking how a set amount would do in an index fund vs. the funds the OP's advisor recommends would be in order?

 

[BGH1]

I've completed a first stab at a budget, for medical I am estimating as I do not currently know what the company plan will cost. Other estimates are food and travel, but I have a pretty good idea. Budget equates to around 77K per year. So, on a 4% draw I can get by with 2.5M (want some buffer).

As for social security, I am planning on pulling as soon as I can, and will likely get around 20K per year on it (dont want to wait). Between SS, and if I can get my account to 2.5M in the next 8 years, I think I should be in good shape, could even get by with less than 2.5M but do not want to bank on SS. I did read an article that indicated if you pull SS as early as you can, and invest all the payouts, you come out ahead when compared to waiting for a larger payout. I know this will only be advantageous if the plan is to leave funds for children etc...

 

[2B]

I did read an article that indicated if you pull SS as early as you can, and invest all the payouts, you come out ahead when compared to waiting for a larger payout. I know this will only be advantageous if the plan is to leave funds for children etc...

It will only be advantageous if your investments increase enough to offset the increasing SS payment or if you die before reaching the actuarial tipping point. Anything that increases your estate will be appreciated by your heirs.

 

[NgineER]

Budget equates to around 77K per year. So, on a 4% draw I can get by with 2.5M (want some buffer).

Make sure you also include taxes in your budget as people either go to jail for not paying taxes, run out of money prematurely with continued lifestyle or are forced to investigate the pet food aisle.

 

[CaliKid]

Yes,

do keep close tabs on the expenses of your advisor.

I just did a quick calculation on your numbers from above, don't know what you are contributing each year, but it is more than $54k as you stated.

8 years of compounded interest at 8% (high I know...) from $1.8MM and $54k contributions --> $3.95MM
If you pay your advisor 1.5% (don't know how much it is...)

8 years of compounded interest at 6.5% (8-1.5%) from $1.8MM and $54k contributions --> $3.56MM

That 1.5% fee turns into 10% less in your final portfolio. That is just in the accumulation phase.

I realize this is an old thread but trying to find people in the class of '22 and found this thread.

It's interesting to compare returns but how do you compare risk? For example, maybe you are making greater returns because you take on slightly more risk in your investment mix!? I obviously don't know. So maybe year 9 your self-managed portfolio goes down 10% and the manager goes down 2%!? My concern with simplified comparisons is it's really hard to do a true apples to apples comparison except for the very long term because then risk has been naturally factored in better. I don't think there is an easy way to factor risk in other than time. Would be curious what analysis is done by you and by the broker on this issue!? I hope things have continued well since this thread was posted. Good luck with your continued success.

 

[BGH1]

Hi everyone, an update 3.5 years after original post.

Net worth increase from 1.8 to 2.2 M.

529 plans underway, and saving 50K per year.

No debt.

Targeting a 3.5 M net worth, which combined with our combined social security and rental income will get us where we need.

Not sure what year, time will tell. Target 10K per month draw in retirement.