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Fairly New Here - Recommendations?
Old 06-29-2016, 10:44 PM   #1
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Fairly New Here - Recommendations?

I am 52 and in a non-profit career that is very fulfilling but not high income. Wife does not work outside the home currently. Kids (2) are in college.

Our ability to save has been somewhat limited due to income and having to pay most of our own health insurance. A real challenge when you only gross $50-60K/year.

That said, we have no debt at all, a reasonable emergency fund, kids' college is paid for through saving and academic scholarships. Retirement accounts (all tax-deferred) currently total $325K.

Within the last few months, I moved jobs where I make an extra $20K/yr and the employer pays for 100% of medical insurance. This has given us some breathing room financially.

I am now contributing $18K a year to the 403b, so basically investing my raise. I would like to max out my contribution at $22k within the next year as I get more acclimated to our new budget. The employer is adding another $7K per year.

I have also recently started Roth IRAs for myself and my wife, and we'll be tossing a bit of cash at them as we are able.

We live pretty frugally on about 50% of our income, so we probably can't do much more than we are doing. Since we haven't had a ton of "flex" income in the past, I just wanted to get everyone's comments and recommendations on what we have done so far. Would you do something differently?

Thanks in advance for your input.
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Old 06-30-2016, 07:02 AM   #2
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Would you do something differently?
It depends on what your plan is? ER? When? Are you planning to stay put when you retire? Is there a chance the kids will come back after college? If you ER's now what would your income stream be pre 59.5?
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Old 06-30-2016, 07:10 AM   #3
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Looks to me like you have a pretty sound foundation, no debt, college costs covered and health insurance. Do you have any idea as far as future pension payouts, social security, etc. If you are used to living on 50% of your current income and don't plan to make any major life style changes that should help you determine what you are going to need in retirement. What are your IRAs, 403b invested in ? Are you aware of the cost structure of mutual funds, etc. ?
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Old 06-30-2016, 10:47 AM   #4
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Your basic situation sounds OK. You are controlling your spending and can now save a substantial portion of your income. You need to sustain this for a period of years until you have sufficient assets to generate the income you need, plus allowance for inflation.
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Old 06-30-2016, 11:17 AM   #5
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Your lifestyle is certainly pointed in the right direction. I don't know that ER is in your future, however you'll probably be fine to retire at normal retirement age.

Just keep doing the same.
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Old 06-30-2016, 12:47 PM   #6
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Good choice to change jobs.

Good to see you have considered ROTH for perhaps the outside savings, as your tax rate is really low so you won't be missing much (Roth's are not tax deductible, but when you withdraw it's all tax free after it's been open 5 years. And I believe your contributions can be withdrawn at any time for say an emergency and are tax free).

Reason for the Roth for some of your retirement money is perhaps one year you have a big emergency, you can pull out 20K and not have extra taxes, and in the meantime it grows tax free like a regular IRA.

Really sounds like you are on the right track.

My pet peeve is your wife could work as there is no raising of children, and since that was not her plan, I'll bet she doesn't have much in the way of job skills.
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Old 06-30-2016, 05:57 PM   #7
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Looks to me like you have a pretty sound foundation, no debt, college costs covered and health insurance. Do you have any idea as far as future pension payouts, social security, etc.
That would be my question too, otherwise you're already doing about all that you can. You didn't say anything about your wife working, but I understand there are valid reasons for her not to.

For example when we moved to WV we had planned on getting part time jobs but found most didn't pay near enough to make the commute worthwhile so that idea was quickly scrapped. Besides, we also found out that not working was better than working.

Here are some issues to think about: Some Important Questions to Answer Before Asking - Can I Retire?
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Old 07-01-2016, 08:22 AM   #8
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Having a solid idea what your income sources will be in retirement is the main thing you will want to nail down. Once you have a good idea what those are, plug some numbers into Firecalc and see what happens. That you have such good discipline in managing expenses and saving means you have levers to work with.

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Old 07-01-2016, 08:31 AM   #9
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Thanks for the comments and encouragement so far.


Wife worked for several years, but quit work a while back to care for aging parents.


No pension unfortunately. Social Security would be around $1800/month for each of us at 62, which is when we will probably take it. I'm a year older than my wife.


We managed to open a Roth last year and put $5K in it. Hoping to max it out this year ($6500 each = $13K total) by selling some personal property.


Our taxes are basically zero due to deductions/charitable giving, but I am considered self-employed for SS purposes, and that unavoidable 15.3% is pure misery. I am sure some of you who own businesses can relate.
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Old 07-01-2016, 08:57 AM   #10
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So a back of the envelope calculation with round numbers says your current income is 80k. Less taxes (18k) and your investments (20k) leaves expenses of 42k. Social security income would be 43k. Obviously you wouldn't be living like a Rockefeller, but unless you are eating cat food today you can probably rule that out

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Old 07-01-2016, 09:26 AM   #11
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swguy, so as long as SS doesn't go bust we are golden, right?
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Old 07-01-2016, 09:29 AM   #12
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swguy, so as long as SS doesn't go bust we are golden, right?
treeofpain, I would urge you to look carefully at the questions addressed in the link in walt34's post. Back of the envelop calculations are a good starting point but more depth and detail is a good thing here.
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Old 07-01-2016, 09:38 AM   #13
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Sure. I guess my point was that assuming SS as a baseline, our 403b and Roths could allow us to retire early, providing a bridge between retirement point and the start of SS. After SS begins, the investments are incremental income.


Example - I retire at 59-1/2, start pulling income from retirement funds. At age 62, reduce pull from retirement based on my SS. A year later, reduce pull from retirement even more when wife's SS kicks in.


So much of the press I see on retirement presents everything in a linear way (example: 3% safe withdrawal rate), while real life can be much different.
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Old 07-01-2016, 11:11 AM   #14
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Have you run your numbers through Firecalc?

Quicken Lifetime Planner is a good, easy-to-use tool for retirement planning. If you have Quicken Deluxe or higher it is included, otherwise well worth the modest cost of Quicken IMO.
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Old 07-01-2016, 12:42 PM   #15
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swguy, so as long as SS doesn't go bust we are golden, right?
Assuming a low enough definition of golden

I guess my point was just that it seems like, at 52, given your situation you are saving as much as you can, and are LBYM. Using your SS income and some projections Firecalc will help inform you how long you will need to work to supplement whatever SS is available at retirement.

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Old 07-01-2016, 01:02 PM   #16
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....So much of the press I see on retirement presents everything in a linear way (example: 3% safe withdrawal rate), while real life can be much different.
You got it. For those who retire early quite commonly their WR is higher than what would be sustainable in the long run but then SS (and pensions where applicable) comes online and the WR declines to a level that, with proper planning) is sustainable.

So for example, in your case, if you retire at 59.5 your nestegg will likely have grown to $600-$700k given your savings, match and some growth. If you carve $115k out of that as a replacement for 2/1/2 years of SS, that leaves $485-585k, which at a conservative 3% WR would give you $15-18k of withdrawals, which when combined with your $43k a year in SS beginning at 62, should provide for a relatively comfortable retirement.

The thing you need to consider though is... let's say that one of you passes just after you retire.... can the survivor live on $36-39k a year since 1/2 of your SS would stop?
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Old 07-01-2016, 01:16 PM   #17
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Try using some of these and they will give you a pretty good idea if you are on track.

https://www.bogleheads.org/wiki/Reti...s_and_spending
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Old 07-01-2016, 01:18 PM   #18
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So a back of the envelope calculation with round numbers says your current income is 80k. Less taxes (18k) and your investments (20k) leaves expenses of 42k. Social security income would be 43k. Obviously you wouldn't be living like a Rockefeller, but unless you are eating cat food today you can probably rule that out

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Where did get the 43K figure for SS? Is that the age 72 number?
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Old 07-01-2016, 01:29 PM   #19
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If your job truly is rewarding, why not continue until you are both at least 62? That would potentially give you a little extra income throughout retirement. I RE'd at 63 and am quite happy with that time. I did not have a great issue with the job (except the night shift wasn't the best) so it was not a hardship. For me, the cost of medical insurance from retirement until Medicare was extremely expensive, so waiting a little longer to RE helped that situation.
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Fairly New Here - Recommendations?
Old 07-01-2016, 01:38 PM   #20
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Fairly New Here - Recommendations?

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Where did get the 43K figure for SS? Is that the age 72 number?

OP said he and his wife will each get $1,800 per month from SS, which works out to a bit more than $43K per year.

OP, I'd double-check those SS numbers to ensure they're not based on you continuing to work to full retirement age. I have a spreadsheet where I calculate my expected SS based on my earnings history, and my SS at 62 is pretty close to $1,800 per month, but I've been within spitting distance of the earnings max for most of my career. Seems odd that you and your wife would be expecting similar payouts if she hasn't been working (unless she earned more than you while she was employed). Anyway, probably good to double-check.
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