$30,000 for the next 10 years

[Foodeefish]

I just left my job after 18 years and will receive* $30K for the next 10 Years because my Executive Deferred Compensation plan automatically pays out due to me leaving the company. This income will be taxed at 30-35% due to the fact my wife and I have* *combined incomes of over $250,000 and this is without the $30K. I am 45 and my wife is 52 and I will be starting a new job in four weeks making the same money ( $150K). With the new job I will be investing as much as my paycheck as I possibly can in their 401k Plan and I currently already have $200K in another 401K plan.


Our plan is to build our retirement home in South Carolina in the next 10 months and pay cash for it. Our current home is worth $650K and we owe $149K on the 4.75% loan- 7 years left.

What would be the best way to invest the $30k each year that I will for the next ten years? Does it sound like Early retirement is near?

[setab]

Send it to me. It sounds as if you don't really need it. It appears to me, from what you have done so far, that you don't really need a lot of help. Why don't you tell us what you decide so we can learn from it.

setab

[Rich_in_Tampa]

Originally Posted by Foodeefish

What would be the best way to invest the $30k each year that I will for the next ten years? Does it sound like Early retirement is near?

Tough to answer without knowing a) what your anticipated expenses would be if you retired, b) where the rest of your nest egg is invested, and c) what other pensions etc. you are considering.

You can do a search here on "allocation" to get some ideas, and others will refer you to books by Hyatt, Merriman and others.

That said, if you are looking for sane allocations and long term results many would recommend one of the Vanguard or Fidelity life strategy funds. Figure on accumulating around 20-25 x your annual anticipated expenses, withdrawing up to 4% of assets a year (plus your pension, if any) adjusted annually for inflation. Your pension ending in 10 years needs to be considered.

Have you tried FireCalc to see where you stand?

[maddythebeagle]

Does it sound like Early retirement is near?

I dont know how you figure. You listed 200k in a 401k, 300k from comp plan, and 500k in home equity in your mid 40s and a high income? You suddenly are going to live on less?

[SteveR]

I am no tax wizard but it looks like your $30k might work harder for you in tax free munis. At your income level you are paying a ton on that additional income.

As for your retirement plans...like has already been said..it all depends on how much you need to live on each year plus inflation. What about health care insurance? What other assets do you have other than what you reported? At your income level and age it would appear that you are low in your retirement plans. Working for 18 years with a working wife at her income level, one would think you guys would have more stashed away. Not being critical of you guys...it just seems a bit odd unless you have stuff you are not telling us about which is fine. Just don't expect accurate answers without accurate data.

You are on the road to ER but if you expect to live even close to the level you are now it would appear you will need a bunch (run FIRECalc) to have enough.

Good luck and welcome to the board.

[virginia]

Well, this may be a stupid response since it sounds like you're doing everything you can already for retirement, but - can you still contribute to an IRA?

[Foodeefish]

Let me give a few more facts so I am a bit clearer. We only started to make this type of income in the last 6 years due to my wife' career change.

-My wife has $150K in her 401K plan.
- $230K in CDs that will be utilized to build the new home ( land is paid for)
- Another piece of land worth $60K that is paid for
- $ 200K in my 401K which is mostly matching the S&P and small cap stocks- some overseas funds as well as mid-cap funds
- My wife has a variable annuity worth $7100
- No debt except $149K on our current home that we will sell once the house in South Carolina is built
- We will work part time when we move to South Carolina just to get medical coverage
- We figured we will need to make $60K to cover all our expenses in South Carolina due to changes we will make to our lives and the cost of living difference from Washington DC ( where we live now)

Can't contribute to IRAs as we make too much income

[cute fuzzy bunny]

If I may...based on your income, level of savings and age it appears you're used to spending a fairly good bit of money. What you've put aside, even with the income streams, would produce a pretty spartan lifestyle. After taxes you'll still be doing better than the average wage earner but there probably wont be any housekeepers, lawn services, frequent meals out, big vacations, etc.

You'll both be sitting home a lot, cooking, cleaning and spending a good deal of time together.

Can you live with that, and do you really like each others company? Right after being uprooted from your community, friends and throwing in a major life change?

[kaudrey]

Hi,

I can't tell when you are trying to retire - in 10 months or 10 years?

Looks like you have $350k in retirement accounts, equity in the house, and a plan to have the retirement house built debt-free. Great!

Do you have any savings outside of the house money and retirement accounts? You probably don't want to access the 401(k)s to early, since they'll have to last a long time.

You say you'll need 60K to live on in SC. Well, you'll have 30K from your pension, and you said you are going to both work part time. If you do this, will you make 30K? I'm assuming you could. So, your pension and part time work could support you, regardless of your other assets.

If you think you'll need more, save a bunch of that $250K annual salary for the next few years and then take the leap.

Good luck!

Karen

[Nords]

Originally Posted by Foodeefish

Can't contribute to IRAs as we make too much income

I haven't parsed the latest edition of IRS Pub 590 to verify, but I believe that while you can no longer contribute to a Roth or make a deductible contribution to a conventional IRA, you can still make a non-deductible contribution to a conventional IRA.

Now that we're in ER and in what we expect will be our lifetime lowest tax bracket, we're converting those IRAs, with all their deductible & non-deductible contributions, to Roths.

So depending on your taxes later in life, you may want to keep contributing to an IRA now and convert to a Roth after the income stops gushing.

[astromeria]

We find $60k to be a generous budget in South Carolina--it covers expensive discretionary and health care spending, and living in a very nice house. We could live here on half as much--no mortgage or other debt is key.

If you'll be living in rural South Carolina, you might want to check out part-time work possibilities in advance (or were they related to current employment such as consulting?). Pay scales are lower here than in most of the country.

[spideyrdpd]

Invest the 230k thats sitting in the cd's and take a mortgage on the new home and use the pension money to pay the note.
Then I would go to either the ny times site or www.mfea.com and run some numbers on funds that made atleast 15% over the last 5 yrs and buy em.
I would tyhen set up some automatic deductions so that your buying more at a regular basis. I would do this in a roth ira.
Rob

[thefed]

Originally Posted by spideyrdpd

I
Then I would go to either the ny times site or www.mfea.com and run some numbers on funds that made atleast 15% over the last 5 yrs and buy em.

Wow. I never thought about buying funds using this innovative technique. Im sure if they've performed for 5 years they will continue to perform well!!!




On another note: 250k income is a lot of money for being debt free. Work a few more years at that job and you're set