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Can I retire well on 150K?
Old 02-04-2013, 09:13 AM   #1
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Can I retire well on 150K?

I am 27 and have 150K in retirement (401K & Roth).

If I quit my job now and only to the Roth IRA (max allowance) for the next 40 years, can I still retire well?

Thanks

I plan to retire (tap into that money) in 40 years. During the mean time, we will live on a single income (I may stay home with my children). I wonder if the amount above can grow into something meaningful. I think as long as I can tap 40-50K from that amount per year I am happy. Once I tap into that amount, it will be for about 15 years. Let say if my fiance divorce me in the future, I wonder, if I can still retired well, even though if I was a stay at home mom.

Current situation:
175K house paided off
150K (about 100K in 401K and 50K in Roth)
20K Emergency savings
No debt
Will continue to max out the Roth IRA (spousal) even if I quit my job

Fiance
140K Retirement
20K Emergency saving
No Debt
He will continue to max out his 401K & 457 (about 35K/year for the next 20 years)
He will continue to max out his Roth IRA (for the next 20 year)

This is assuming worst case scenario. I can't imagine not working another day the rest of my life after 28 years old. But still, I wonder if this was to happen, can I live on 150K +Roth IRA yearly that will grow into something.

Retired well to me means 40K - 50K a year income
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Old 02-04-2013, 09:21 AM   #2
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No one can give you a meaningful answer without knowing (at the very least) $ nest egg, yrs duration and $ annual spending. You're about halfway there, so we'd have to make too many assumptions on your behalf. I'd suggest you try FIRECalc: A different kind of retirement calculator and note there are several input pages to allow you to model whatever you'd like to evaluate.

And I'm not sure you can contribute to an IRA without earned income, so I am assuming you have a working spouse that would allow spousal IRA contributions.

Best of luck...
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Old 02-04-2013, 09:22 AM   #3
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OP has changed the original post. Sorry, my comments no longer apply.
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Old 02-04-2013, 09:26 AM   #4
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Quote:
Originally Posted by Cloverissweet View Post
I am 27 and have 150K in retirement (401K & Roth).

If I quit my job now and only to the Roth IRA (max allowance) for the next 40 years, can I still retire well?
Thanks
No Unless you have a sugardaddy or sugarmama that you are not mentioning.

In fact, you can't even retire not to mention retiring "well".

Check out Quicken Lifetime Planner.
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Old 02-04-2013, 09:39 AM   #5
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Quote:
Originally Posted by Cloverissweet View Post
I am 27 and have 150K in retirement (401K & Roth).

If I quit my job now and only to the Roth IRA (max allowance) for the next 40 years, can I still retire well?
Thanks
I can't answer your question, but you are doing really well to have $150k stashed away by the age of 27! I only had debt until I was 35.

Will you share you current situation and goals for the future with us?
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Old 02-04-2013, 09:48 AM   #6
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Quit your job now, but retire when you're 67?

The $150k might grow to $1.5M (in today's dollars) in 40 years. $6500/year into a Roth might grow to $1.0M. So $2.5M, some of which will be taxable as regular income. Taking 4% of that gives you $100k/year to live on, including paying the deferred taxes. No SS I would assume. Still a respectable income. Your lifestyle will determine how "well" you can live on that.
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Old 02-04-2013, 09:50 AM   #7
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She could theoretically retire on $4,500/yr, but I assume that's not what she has in mind.
I agree, but I "assumed" that one cannot live on $4,500 a year unless you have a sugardaddy/mama to support you. Besides, the $150k is in tax sheltered accounts so s/he would have to 72t or pay the penalty.
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Old 02-04-2013, 09:58 AM   #8
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Sorry, I will clarify myself a little

I may be a stay at home mom. So I wonder if what I have saved so far can offer me with a decent living at retirement. When I decide to tap into the amount in about 30-40 years.

Current situation:
175K house paided off
150K Retirement
20K Emergency savings
No debt
Will continue to max out the Roth IRA (spousal) even if I quit my job

Fiance
140 Retirement
20 Emergency saving
No Debt
He will continue to max out his 401K & 457 (about 35K/year for the next 20 years)
He will continue to max out his Roth IRA (for the next 20 year)

Goal is to have a decent amount of retirement save (even if our marriage ended up in divorce). I wonder if this amount150K with the yearly roth IRA contribution can be enought?
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Old 02-04-2013, 10:00 AM   #9
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Cloverissweet: How much does retire well cost in $/yr in your view?

And I see you've substantially edited your OP, though we still don't know what your idea of "well" is.
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Old 02-04-2013, 10:06 AM   #10
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40-50K a year
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Old 02-04-2013, 10:09 AM   #11
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Quote:
Originally Posted by Cloverissweet View Post
40-50K a year
You have enough to try FIRECalc: A different kind of retirement calculator now, give it a whirl.
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Old 02-04-2013, 10:25 AM   #12
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Too many moving parts for a quick answer. While FIRECalc is great, Quicken Lifetime Planner (included in Quicken Deluxe and higher) is a reasonably intuitive retirement planning tool that would be a good place to start your analysis since it can provide for college expenses, living expenses and other life events.
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Old 02-04-2013, 11:31 AM   #13
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In 40 years, $150K at 5% *real* growth (adjusted for inflation) becomes just over $1 million, meaning a "safe" income stream of probably $30-40K per year in today's dollars.

If I add in the current $5500 per year in contributions for the next 40 years (remembering that you have to have EARNED income to contribute to it, whether yours or a spouse's), it becomes over $1.6 million in today's dollars after Year 40 -- maybe a $50K income stream annually.

Note that this was a quick and dirty Excel exercise. And it assumes a 5% real return over the 40 year time frame, which may or may not be in the ballpark and may or may not fit with your target asset allocation.
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Old 02-04-2013, 11:58 AM   #14
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If the stock market did well enough (within norm of historical returns) in the next 40 years, yes you can do it since by that time you will also have SS coming in.

That is especially true if your husband will put in 35 k a year in his 401k and 457 for another 20 years. You two can do it on one income because the house is paid for and you have no debt. His salary sounds like it is reasonable if he can put in 35k a year into 401k and 457.

The two areas of caution are his job security and the relationship stability (there is close to a 50% divorce rate among married couple these days).
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Old 02-04-2013, 12:14 PM   #15
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It sounds like you might be OK with what you have. However, I think this is far from your most important consideration.

If you become a SAHM, I strongly urge you to find a way to keep whatever your professional skills are up to date and try to generate at least some income. Before we had kids, DW quit her job (at my urging) to figure out how she was going to start her private practice and be able to stay relevant (and hopefully earn some income). This has worked out well, although I believe the most she has netted annually in a decade of self employment was $10k. Because she has stayed active in her field and does not have a giant black hole in her resume, DW could walk into a job tomorrow in her field and clear enough for us to live on if necessary. If I for some reason could not earn a living or of we were to get divorced, she is economically viable on her own.

Unfortunately, divorces happen. In her work as a career counselor DW has dealt with several newly single moms who find themselves having to get back into the labor force after a multi-year basence. Their skills are atrophied and they have a lot of wood to cut before they can even find any job, let alone one that compares to what they hade before leaving the workforce. Find a way to keep your hand in. If you can structure this as a sole proprietorship or 1099 consultant, it is possible to shelter all of your income up to about 23k annually from income taxes (still get tagged by self employment taxes, unfortunately) by putting your earnings in a solo 401k. This would boost your retirement savings and keep you out of being in the marginal bracket every year.
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Old 02-04-2013, 12:16 PM   #16
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The two areas of caution are his job security and the relationship stability (there is close to a 50% divorce rate among married couple these days).
I didn't want to sound like a Debbie Downer with the divorce stats, but yeah, this is not only a caveat about retirement security but also a caveat about making sure one is still marketable in the workplace if such an unfortunate event occurred.

I'd also suggest that in *some* cases, a working spouse can grow to resent a non-working spouse, especially if they feel trapped in a job they hate. Now that may not describe your fiance but it *is* something to keep your guard up against. Not the most romantic thoughts, I know, but still...
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Old 02-04-2013, 12:20 PM   #17
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The GIANT problem I see with your question is that you are asking about building wealth based upon your future husband working and supporting you which will also make your Roth contributions possible but you seem to not really consider your future husband in your retirement plan. Marriages where both parties are on board with a plan to work together as a team to the end often work out well. Marriages where one party is just along for the free ride usually do not last. If the marriage fails ten years down the road you may be in a bad position with outdated work skills. You and your fiancee both seem to be living the LBYM lifestyle. If you get married for the right reason and stay married you can probably work as a team towards a nice early retirement.


Edit to add: Geez, I sure sound like an OLD guy.
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Old 02-04-2013, 01:19 PM   #18
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OP I admire your desire to plan and it's definitely a good thing to do, but you must take any projections with a big grain of salt. The variables and possible variation in them are just too big to predict anything with a large degree of certainty. You are making good plans and doing the right things, so continue to be frugal and save as much as you can as these will only improve your potential outcomes. Even for those of us close to or approaching retirement the uncertainties of lifespan, investment return, health care costs etc are large, and the uncertainty on all of those will be even greater for someone who is 27.
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Old 02-13-2013, 08:19 AM   #19
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Quote:
Originally Posted by Cloverissweet View Post
I am 27 and have 150K in retirement (401K & Roth).

If I quit my job now and only to the Roth IRA (max allowance) for the next 40 years, can I still retire well?

Thanks

I plan to retire (tap into that money) in 40 years. During the mean time, we will live on a single income (I may stay home with my children). I wonder if the amount above can grow into something meaningful. I think as long as I can tap 40-50K from that amount per year I am happy. Once I tap into that amount, it will be for about 15 years. Let say if my fiance divorce me in the future, I wonder, if I can still retired well, even though if I was a stay at home mom.

Current situation:
175K house paided off
150K (about 100K in 401K and 50K in Roth)
20K Emergency savings
No debt
Will continue to max out the Roth IRA (spousal) even if I quit my job

Fiance
140K Retirement
20K Emergency saving
No Debt
He will continue to max out his 401K & 457 (about 35K/year for the next 20 years)
He will continue to max out his Roth IRA (for the next 20 year)

This is assuming worst case scenario. I can't imagine not working another day the rest of my life after 28 years old. But still, I wonder if this was to happen, can I live on 150K +Roth IRA yearly that will grow into something.

Retired well to me means 40K - 50K a year income

Congrats, you're both doing really good considering your age (not sure you mentioned your spouses age, I'm assuming close to yours). A paid off house and 150k saved in retirement funds already is very impressive. Throwing kids into the mix may disrupt your yearly savings slightly. However, doing some rough calcs based on the following:

- Having 150k already save and adding 46k/year for the next 20 years (35k 401k + 11k Roth)

The above will give you roughly 1.7MM (at 4% real return compounded annually). This equates to roughly 50k/year (at a 3% withdrawal rate). This figure doesn't include any pension and/or SS that you or your spouse would be eligible for.

You sound like you LBYM and save a good amount yearly. Once you nail down your yearly expenses, you'll have a better idea of whether or not the 50k/year would be enough. However, that may not be possible until you get closer to the end of the 20 year mark. In the meantime, saving 46k/year will definitely get you there. Good luck and welcome to the forums.
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Old 02-13-2013, 08:38 AM   #20
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Just a note of caution, a fiancee is NOT a husband.
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