Updated: Sense Check Please

[jt999]

I wanted to re-post since I have updated information based on your feedback/questions:

46 and 4 months (LOL) – Married with 2 Kids

Assets/Income Streams/Benefits
- Primary Residence – Mortgage Will be Paid off September 2017 (400K Equity)
- $1M - 401K/Traditional IRA’s
- 15K – Taxable Account
- 60K – Emergency Fund (AFTER mortgage Payoff)
- Pension - 6K/Year (could take beginning at age 50), 12K/Year (if I start at 60) – not large but I believe it’s secure
- Social Security – Both calculated assuming we work until 50 and take early at 62 ($1,674+$1,900=$3,574)
- Medical – I qualify for retiree medical if can make it to 51.5 – cost would be 2K month for a family – has been tinkered with in the past and I would expect more changes so not sure this is worth staying an extra 1-2 years

Based on where we are at, I was thinking of doing the following, primarily to increase our financial flexibility and avoid 72T/RMD’s, if possible:
- Targeting savings of 100-120K/year for the next 3-5 years into Taxable Accounts, primarily focused on building a passive income stream.
- Both kids in reasonably good shape with 529’s – one entering Jr. Year (only Sr. Year will be pay as we go, 30K) / younger HS soph – 70K saved
- Minimum 401K to get the Full Company Match

In 3-5 years, we would like to move to lower COLA area with activities that we enjoy (maybe Colorado, Utah, Idaho) and downsize – I would expect we would pick up 100K in doing so...smaller place but on a lake, hopefully

Looking for advice on strategy for the next few years – sound doable or am I daydreaming?

Thank You.

[FlaGator]

Think your right to pump up your taxable accounts over the next few years. Can't tell what you have in mind for the "passive income stream" with that, so my thought is to carefully assess the risk if you do anything other than draw it down during the bridge years.

Your deferred accounts should about double with a reasonable AA (50-70% equity) before you hit 59.5. Don't expect the growth to be linear, though.

Pension looks like a jump ball, doubles in 10 years, about what you could expect investing on your own. You have it bracketed now and can decide as the time approaches.

Retiree HI doesn't obviously look like a good deal now. Check private options in your area as well as your potential new destinations to help bracket current costs as a reference. You don't have to decide today, so don't. Monitor and see how things evolve over the next few years, as they will be different.

[joeea]

Quote:

Originally Posted by jt999 Looking for advice on strategy for the next few years – sound doable or am I daydreaming? Thank You.

You don't mention your goals. You can't assess the if the strategy is "doable" without knowing what you hope to achieve.
- When do you want to retire?
- What income do you want to have in retirement?

[jt999]

By passive income stream, I would look to build a diversified portfolio of mostly dividend stocks, including some select MLP's, maybe use some to do peer-to-peer lending.

Since mortgage and the majority of college expenses will be in the rear view mirror very soon, that's what I'm thinking to prep for the bridge years and help ease our transition. If we stick with it, over 4-5 years, I believe 500-750K is achievable - possibly more if I charge the kids rent

Any bonuses/windfalls/exercising of any stock options would go directly into this account. I also need to look into Health Savings Accounts/Long Term Care to see if they need to be part of our plan. I do not know enough about those.

[jt999]

Quote:

Originally Posted by joeea You don't mention your goals. You can't assess the if the strategy is "doable" without knowing what you hope to achieve. - When do you want to retire? - What income do you want to have in retirement?

Would like to retire in 5 years. Looking to build income and/or drawn down investments to cover 80K in annual expenses (trying to be conservative) once retired. Spouse would need to work 5 to vest in 401K company match and I would need the same to quality for retiree HI.

[joeea]

Quote:

Originally Posted by jt999 Would like to retire in 5 years. Looking to build income and/or drawn down investments to cover 80K in annual expenses (trying to be conservative) once retired. Spouse would need to work 5 to vest in 401K company match and I would need the same to quality for retiree HI.

Hmm, it might be a bit tight. You are trying to fund a lot of retirement years (40?) at 80k/yr adjusted for inflation.

Consider running the numbers for taking Social Security benefits later than 62 (at FRA, then at 70). SS is COLAed, where your pension might not be. Inflation is low now, but it hasn't always been that way and won't always be that way.

Consider what happens to your pensions when one of you passes.

Check if ACA-subsidized health insurance is available for you. $2k/month seems like a lot to me.

Consider beefing up your emergency fund before contributing so much to your taxable accounts. If you can save that much, you want to have an emergency cushion in case your work goes south.

Look into Long Term Care Insurance, and have a plan for how you would handle such conditions.

It does make sense to increase flexibility by saving more into your taxable accounts.

Sounds like you are in good shape. Might make sense to run the numbers and see how close you are.