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Smooth path to retirement?
Old 05-13-2012, 11:56 AM   #1
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Smooth path to retirement?

Here are the basics of our financial situation and I wanted to know responders thoughts on the likelihood of reaching our goals.

Goals:
  • Retire in 15 years at age 60
  • Live on $100k annually in todays dollars for first 10 years, then likely down to $75k in todays dollars from there on out

Financial situation:
  • Both 45 years old with combined income of $175k
  • No debt
  • House paid off
  • Portfolio is comprised of low cost core four portfolio with slight small cap value tilt
  • Total portfolio is $1.2 Mill with about half of it tax deferred in 4o1k or IRA's then half in tax efficient indexes
    Allocation is approximately 75/25 stocks to bonds
  • we anticipate contributing $20k annually to retirement portfolio for the next 15 years

Running Firecalc it looks like we should be ok, I wanted any feedback on whether the retirement in 15 years is realistic.
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Old 05-13-2012, 03:40 PM   #2
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You seem to be in a great position for your age. I'm assuming no pension since you didn't mention any. I'd say if Firecalc says you'll be okay, then you'll probably be okay.
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Old 05-13-2012, 04:12 PM   #3
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Looks good to me.

If Firecalc, says ok, you should be good too, but consider...

Is 100k enough considering your current expenses, healthcare exp and aging home/repairs & maint.?
Why not max out your 401k contributions? age 50+ catch up?
Assume no kids, pensions, or SS in the mix, since it wasn't mentioned
Any parents that might need assistance... time or $$
Why not retire sooner than 15 years?
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Old 05-13-2012, 09:38 PM   #4
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Yes, we do have a little one and will be contributing to a 529. As for maxing out retirement plans, we will do so.

I just wander if $100k is a reasonable amount to retire on initially, other than two vacations a year and home maintenance, not much expenses oth than healthcare. Healthcare is a huge wild card.
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Old 05-13-2012, 11:47 PM   #5
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Each person/family has to track expenses for their current budget (retirement savings, taxes, work related cost, etc) and updating for ER future expenses (reduce some line items, add medical, more travel, etc). This can be very personalized and can change in different stages of life.

As for the litte one, it's a personal choice to fund part/all/none of related educational expenses. Besides healthcare, kids' education and additional travel keeps me in the workforce.

Try using the search tool on the forum, you may find threads that can help you template your expenses, etc. and see how they can differ.

I found this thread from 2010, didn't see 2011. It's an eye opener to me when I saw a variety of budgets from this board, but you need to understand your lifestyle.
How much did you spend in 2010?

Oh BTW - I'm not ER yet and in the planning phase myself, but spent some time crunching numbers for the current and future lifestyle I envision for my family. I sometimes wish to fastforward life, but don't want to miss out on life either.

Good luck and welcome to the forum.
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Old 05-14-2012, 05:22 AM   #6
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Quote:
Originally Posted by delaygratification View Post
Yes, we do have a little one and will be contributing to a 529. As for maxing out retirement plans, we will do so.

I just wander if $100k is a reasonable amount to retire on initially, other than two vacations a year and home maintenance, not much expenses oth than healthcare. Healthcare is a huge wild card.
The only way to know if $100k is enough is to track your expenses. Healthcare is a wild card but not likely to continue being one and over the next couple of years should become more predictable.
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Old 05-14-2012, 06:50 AM   #7
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Quote:
Originally Posted by delaygratification
I just wander if $100k is a reasonable amount to retire on initially
Yes ... No ... Maybe so!

$100,000 would be much more than enough for many retires, but grossly inadequate for others. It depends on your individual lifestyle, including where you want to live and what you want to do.

As others have said, your question can't meaningfully be answered without a pretty good idea of your anticipated expenses. The latter can be obtained by keeping diligent track of your current expenses for at least six months (longer is better) and then adjusting up and down as appropriate to reflect anticipated changes in retirement (e.g., no need for retirement saving but increased travel budget). This is not a perfect method, but much better than simply guessing what seems "reasonable".

Good luck!
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Old 05-14-2012, 10:08 AM   #8
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All I can say is wow, and congratulations. You have a very large nest egg at a relatively young age, and you have no debt! I don't know how you did it... either you got an inheritance, or you got stock options from working at a successful startup, or you sold a business... but either way, congratulations. I think retiring in 15 years is very realistic. I also think you could retire before that if you wanted to.
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Old 05-14-2012, 10:18 AM   #9
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thanks. No inheritance, I was fortunate to make good money at a company and saved like crazy. My parents, unfortunately were not very good with money and it left an impression on me to save.

My income in my mid 40's is much less after a layoff, but both my wife and I will make about $175k or more and really like to try and be responsible. We really dont count on social security being around (at least not in the present payout scheme). Retiring early constitutes a pretty big medical insurance payout, so that is our biggest concern. I just dont know how to account for that wild card.

My guess is we could live comfortably on $5-7k in todays dollars in retirement PLUS healthcare.
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Old 05-14-2012, 10:19 AM   #10
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You may want to dive into the detail of what you really need to live with a paid for house and kids out of the nest. We recently ER'd and live reasonably well on about $60k a year including health care costs. Look at what you are spending now and adjust it for taxes, tuition (if applicable), other things that wouldn't exist if you were retired to get a better idea.

We put just about everything on credit cards that get paid off every month and then import the credit card activity into Quicken and categorize it. ATM withdrawals (cash spending) just goes into a spending money category. After doing this for a while you should be able to get a good sense as to where the money goes and how much you need to live.
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Old 05-14-2012, 11:15 AM   #11
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No comment on children. There aren't any? Or you've got three still at home?

If your current spending includes children, you can hope that goes away someday.
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Old 05-14-2012, 11:18 AM   #12
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Yep, one small child and we are utilizing a 529 plan for him. It is a great point about child related expenses, they are not cheap! They are priceless however!
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Old 05-14-2012, 12:54 PM   #13
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Looks pretty good to me. Just be sure to manage your risk carefully...as you get within 5 years of pulling the plug be sure to start managing your way out of some equities.

We are within just about 2 years of FIREing and plan to live on $85k/year...and that includes a $40k car every 5 years, woodworking hobby, 2 vacations/year of $8k each, and eating out 2x/week...so I don't think you'll suffer.

If you're really nervous about the health care costs...consider part time work for a few years. Of course in 15 years this may not apply, but today there are a handful of employers that offer healthcare (you must purchase it, but it's inexpensive) to even part-time employees. Work 20 hours/week at Starbucks or Walgreens and you're good to go. You could work one year, your wife the next.
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Old 05-17-2012, 01:52 PM   #14
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Quote:
Originally Posted by delaygratification View Post
Here are the basics of our financial situation and I wanted to know responders thoughts on the likelihood of reaching our goals.

Goals:
  • Retire in 15 years at age 60
  • Live on $100k annually in todays dollars for first 10 years, then likely down to $75k in todays dollars from there on out

Financial situation:
  • Both 45 years old with combined income of $175k
  • No debt
  • House paid off
  • Portfolio is comprised of low cost core four portfolio with slight small cap value tilt
  • Total portfolio is $1.2 Mill with about half of it tax deferred in 4o1k or IRA's then half in tax efficient indexes
    Allocation is approximately 75/25 stocks to bonds
  • we anticipate contributing $20k annually to retirement portfolio for the next 15 years

Running Firecalc it looks like we should be ok, I wanted any feedback on whether the retirement in 15 years is realistic.

I left a question out for the forum, namely about asset allocation. If I am attempting to retire in 15-16 years, with a portfolio of 1.2Mil for 2 people, would you be more aggressive with the stock/bond mix or more conservative leaning heavier on bonds? Obviously inflation is a huge wildcard. Any thoughts? Thanks in advance
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Old 05-17-2012, 02:18 PM   #15
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If I'm reading your post correctly I would hope that your 1.2M will grow to more than 1.2M in 15 years.


OK, I get it!
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Old 05-17-2012, 02:53 PM   #16
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I am not sure what the confusion is. In other words, for my spouse and I to retire given the info provided already, are we taking too little or too much risk with our stock/bond allocation? Thanks
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Old 05-17-2012, 08:04 PM   #17
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Quote:
Originally Posted by delaygratification
Here are the basics of our financial situation and I wanted to know responders thoughts on the likelihood of reaching our goals.

Goals:

[*]Retire in 15 years at age 60[*]Live on $100k annually in todays dollars for first 10 years, then likely down to $75k in todays dollars from there on out



Financial situation:

[*]Both 45 years old with combined income of $175k[*]No debt[*]House paid off[*]Portfolio is comprised of low cost core four portfolio with slight small cap value tilt[*]Total portfolio is $1.2 Mill with about half of it tax deferred in 4o1k or IRA's then half in tax efficient indexes
Allocation is approximately 75/25 stocks to bonds[*]we anticipate contributing $20k annually to retirement portfolio for the next 15 years


Running Firecalc it looks like we should be ok, I wanted any feedback on whether the retirement in 15 years is realistic.
As a Stranger on the Internet, I'd say this looks fine.

You are expecting the portfolio to almost double (in current dollars) in 15 years to reasonably meet the spending target, which is historically fairly likely. You're heavy on equities, which is appropriate for a longer time horizon like your 15 years. As the Big Day comes up you might want to have a lower equity exposure. An easy way to do that would be to continue making your annual contributions, putting them on the bond side, and rebalance as needed every several years to get closer to your target allocation when in retirement.

Good job!
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Old 05-17-2012, 10:55 PM   #18
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Yes I think it is realistic. Personally I would be saving more now if possible.
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Old 05-18-2012, 11:16 AM   #19
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Originally Posted by MichaelB View Post
The only way to know if $100k is enough is to track your expenses. Healthcare is a wild card but not likely to continue being one and over the next couple of years should become more predictable.
+1. But even without Soc Sec, FIRECALC looks promising if I interpreted your info (and FIRECALC) accurately. Congrats...
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Old 05-18-2012, 03:33 PM   #20
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I am in a similar situation, 41 around 1.1 but my AA is much more conservative. Currently 25% equities. Moving to 30% by end of this year but will not go over 40% since there is no point of potentially causing substantial harm to what took me 20 years to build.

Having a budget makes sense. I thought we were good at certain amount but after we crunched our numbers, I was off by 50% on our expenses. So now we keep track of everything in excel including tiny amounts like snacks since they really add up over the month.
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