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Will i be able to retire at 80% at 56?
Old 04-17-2008, 08:54 PM   #1
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Will i be able to retire at 80% at 56?

Hi everyone. I am 47 years old. When I retire at age 56, I will get 55% of my salary on a defined pension plan. I will continue contributing $18k to my 403b , $10k to my 457B and maximum amount to my Roth IRA until age 56.
Presently I have $280k in my retirement plan. The money is in Vanguard with a 75 to 80% stock to bond ratio.
Will the extra money I have and will continue to contribute to my retirement give me the other 25% I need to reach 80 %?
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Old 04-17-2008, 09:02 PM   #2
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Welcome, silvia. You might want to check FIRECalc to answer your own question -- see the link at the bottom of the page. It will use historic stock returns and other details to help you get a handle on things.
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As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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Old 04-17-2008, 09:03 PM   #3
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Hi Silvia. I'd recommend you go to FIRECalc, read a little about how that program works, then plug in your numbers. That should give you a good indication whether your current nest egg plus planned savings will result in the amount you are seeking.

Cross-posted with Rich...what he said.
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Old 04-17-2008, 11:10 PM   #4
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Do the math - FireCalc helps - if there's just no way it can come up to enough, there is one number that you do have control over to make the ER calculation work - that is, you can always change your plan by adjusting your future lifestyle financial needs downward to make a happy comfortable ER possible. (provided you have medical needs covered) This results in a more modest ER than you might have hoped for, but ER nonetheless. Though I am not ER yet (another year or so) I believe there is an intrinsic value just in the fact of being ER that can't be put on a spreadsheet.

If I may wax philosophical for a moment:

I've realized that at age 49, we have to accept (& get past) the truth of what what we did or didn't do in our past (things that were both within & out of our control) has affected our financial situation now that we are hitting our 50's.

Some folks can be very happily retired on 30K (today's dollars) a year.

This is a very individual tradeoff decision some of us have to make - Do you want to retire at 56 with what you'll have accepting whatever more modest lifestyle that provides? Or continue being a wage slave (assuming you're not self-employed) until it reaches your ideal at whatever age that works out to be?
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Old 04-18-2008, 01:42 PM   #5
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Don't assume you need 80% of your pre-ER income. Analyze your income over the next few years to come to a good understanding of your actual needs - only you can identify that. Then add things like healthcare - if you don't have retirement healthcare - etc.

Your tax rate in ER may be much lower than your current tax rate. You're putting money away each year - those are outflows that you will not have after ER.

I read Bob Clyatt's Work Less Live More when I started this journey and I found it helped me a lot. There are other books too on the subject which will be time well spent.

All the best.
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Old 04-18-2008, 05:53 PM   #6
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additional information

Upon retirement, my house will be paid off. Presently, the house is worth about 900k in CA. I won't need to worry about paying enormous fees for healthcare as I will be moving back to Canada. I have dual citizenship.

Will this change the picture of 80% pre-retirement income?
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Old 04-18-2008, 10:54 PM   #7
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Quote:
Originally Posted by silvia View Post
Hi everyone. I am 47 years old. When I retire at age 56, I will get 55% of my salary on a defined pension plan. I will continue contributing $18k to my 403b , $10k to my 457B and maximum amount to my Roth IRA until age 56.
Presently I have $280k in my retirement plan. The money is in Vanguard with a 75 to 80% stock to bond ratio.
Will the extra money I have and will continue to contribute to my retirement give me the other 25% I need to reach 80 %?
Assuming a return rate of 7%, your investment will grow to $964,743 by age 56. If we assume a safe withdrawal rate of 4%, you can determine whether you can reach 80% by the following calculation:

0.55x + 0.04*964,743 = 0.8x

x is salary at age 56.

If the left side is greater than the right side, that means that you will have enough funding to provide 80% of salary needed for living expenses.
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Old 04-19-2008, 08:07 AM   #8
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Quote:
Originally Posted by silvia View Post
Upon retirement, my house will be paid off. Presently, the house is worth about 900k in CA. I won't need to worry about paying enormous fees for healthcare as I will be moving back to Canada. I have dual citizenship.

Will this change the picture of 80% pre-retirement income?
Probably. Health insurance is about 15% of my retirement budget.

But rather than trying to find a "percentage of current income", you should develop a budget in retirement, based on your best estimate of actual expenses. I suspect if you polled the folks on here, that "percentage of current income" would vary between 50% or less (downsizing, moving to a low-cost area), and 150% or more (extensive travel, buying a sailboat). This is an area where one size does not fit all.

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