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Chances of retiring before 60
Old 08-18-2012, 03:02 PM   #1
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Chances of retiring before 60

Hi everyone,

I got a bit of a late start on my retirement but realize I don't want to work till I'm 65 so just got serious about it.

A bit about me. I have a wife and 2 young kids, 1 and 3 and we both work.

We currently have about a years worth of expenses in the bank and the only debt is the mortgage which will be paid off in 12 years.

We have a bit over 200k in 401k and are adding 30k a year to it. Combined income is $135,000.

I've done a bunch of calculators and they all tell me something different. I'd like to retire before 60, hopefully closer to 55 and enjoy life. Both of our kids are in daycare which is eating up a lot of income, when they're done, savings will go up.

I'm still a ways away and have no clue what expenses will be in 20 years, but plan on having no debt, and can live on much less than we do know.

So my question is, what are our chances of leaving the rat race early?
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Old 08-18-2012, 03:21 PM   #2
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You do not give your age. If you are 25, you are in very good shape. If you are 50, no so good, but better than many. Sounds like 35. Not bad, and 'your head is in a right place'. Plan ahead. (Circumstances will change all the time, but adjust the plan.)

I feel like an alien here in that I like what I do and would be happy doing it until they sack me. (Not always so. Fifteen years ago, I hated my job, but things changed.)

I counsel that everyone should find something they like to do and keep doing it. Sadly, that seems to be hard to do, or impossible, for most people.
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Old 08-18-2012, 03:31 PM   #3
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Your on the money, I'm 37 and don't hate my job, just don't love it. Would much rather get out of the corporate 8-5 life.
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Old 08-18-2012, 04:57 PM   #4
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I feel like an alien here in that I like what I do and would be happy doing it until they sack me. (Not always so. Fifteen years ago, I hated my job, but things changed.)
Does this mean that I should stop feeling sorry for you due to your being stuck way out in the middle of nowhere the boonies in Azerbaizan?
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Old 08-18-2012, 05:00 PM   #5
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Does this mean that I should stop feeling sorry for you due to your being stuck way out in the middle of nowhere the boonies in Azerbaizan?
Naaaah...
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Old 08-18-2012, 05:02 PM   #6
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Your on the money, I'm 37 and don't hate my job, just don't love it. Would much rather get out of the corporate 8-5 life.
Welcome to the forum. I'd say your doing all right. Early retirement means saving a lot, which isn't easy with children, but it can be done.
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Old 08-18-2012, 05:03 PM   #7
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Does this mean that I should stop feeling sorry for you due to your being stuck way out in the middle of nowhere the boonies in Azerbaizan?
You feel sorry for that guy?
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Old 08-18-2012, 05:09 PM   #8
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You feel sorry for that guy?
I do! I do! I feel sorrier for him than almost anybody here.* Remember when he almost took a contract in Pakistan? (shudder) Nothing wrong with these countries, but at this particular point in time, residing in such places is not my idea of living the high life.

Besides, he lived in Baton Rouge for a while so he knows about good food, and I seriously doubt the food in Azerbaizan has much to recommend it.

*Sorry, Ed! Just being honest...
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Old 08-18-2012, 05:12 PM   #9
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I do! I do! I feel sorrier for him than almost anybody here.* Remember when he almost took a contract in effing Pakistan? (shudder) Nothing wrong with these countries, but being forced to reside there is not my idea of living the high life, especially at this point in history.

Besides, he lived in Baton Rouge for a while so he knows about good food, and I seriously doubt the food in Azerbaizan has much to recommend it.

*Sorry, Ed! Just being honest...
Well, he is a sorry one, so I see your point. But he does have redeeming qualities. For example, he likes Polar. That shows he is a man of character.
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Old 08-18-2012, 05:16 PM   #10
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Well, he is a sorry one, so I see your point. But he does have redeeming qualities. For example, he likes Polar. That shows he is a man of character.
Oh, he is definitely a man of character! After all, he often speaks of Louisiana with nostalgia. Or perhaps I am imagining the nostalgia.
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Old 08-18-2012, 05:20 PM   #11
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Bax10, sorry if I hijacked your thread. Didn't mean to!

I think you have plenty of time to plan a retirement at age 60. You can do it but it does take a lot of planning and saving between now and then. There will be unexpected expenses, and setbacks, but you can overcome these obstacles.

I didn't start planning mine until age 50, but then I wasn't able to retire untl age 61.
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Old 08-18-2012, 05:41 PM   #12
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That's alright, you can hijack my post anytime.

Should I put a portion of my savings into something else like a Roth, or stick with the 401k, since I'm certain I'll be in a lower tax bracket in retirement?
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Old 08-18-2012, 05:44 PM   #13
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Of course with 401k first if your employer provides matching.

If you keep saving like you did ($30K/yr), your chance looks pretty good.

PS. Don't know about Pakistan, but Azerbaijan seems an exotic place that I may visit some day. Here's some photos from Wikipedia of Baku.





Of course, Ed can tell us more in a separate thread if he feels like it.
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Old 08-18-2012, 05:48 PM   #14
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That's alright, you can hijack my post anytime.

Should I put a portion of my savings into something else like a Roth, or stick with the 401k, since I'm certain I'll be in a lower tax bracket in retirement?
If you retire before 59-1/2 you'll probably want some taxable account. I think there's a way to take out from the 401k after 55 but there are some special conditions to that.

Overall I think you are doing fine. You are probably about the same age as me and I also got a late start. Keep saving as much as you can for now. So much could change in the next 15-20 years.
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Old 08-18-2012, 05:49 PM   #15
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That's alright, you can hijack my post anytime.

Should I put a portion of my savings into something else like a Roth, or stick with the 401k, since I'm certain I'll be in a lower tax bracket in retirement?
Apologies for the hijack.

You should try to do both. Always take advantage of an employer match for the 401(k). Check your marginal tax rate. With two kids and a mortgage it might be low. If it is in the high teens or low 20%-ish range a Roth is a fine option. It's not just about the future tax rate - with a Roth you have no mandatory withdrawal, and that gives you a bit more flexibility when you retire to manage your overall tax rate.
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Old 08-18-2012, 05:52 PM   #16
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I think the 401K is probably the best choice. That lowers your tax bracket now, when it is probably a lot higher than it will be after retirement. If you reach the contribution limits to the 401K, then you can start the Roth. I contributed the maximum to both before i retired, but then I was on a shorter timeline than you so I had to do all that and then save in taxable too, pay off the house... whew! Makes me tired just remembering it.
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Old 08-18-2012, 06:31 PM   #17
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You should try to do both. Always take advantage of an employer match for the 401(k). Check your marginal tax rate. With two kids and a mortgage it might be low. If it is in the high teens or low 20%-ish range a Roth is a fine option. It's not just about the future tax rate - with a Roth you have no mandatory withdrawal, and that gives you a bit more flexibility when you retire to manage your overall tax rate.
Their marginal tax rate is either going to be 15 or 25%, not high teens or low 20s. You must be thinking of that effective tax rate poll thread. But you are right that the marginal tax rate is the one to consider. At $135K income, minus 30K 401K, minus $14+K exemptions, mortgage deduction, state income tax deductions, possible FSA...my guess is that they are just into 25% but not by too much. Worth checking to make sure.

Hopefully as income goes up, you can hold expenses fairly steady and you can do a Roth and also save in a taxable account.
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Old 08-18-2012, 07:57 PM   #18
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My tax rate is 25% right now. 3% of the 401k comes from my employer. I max my 401k. I think I'll try and max my wifes before going to the Roth, or use my yearly bonus on one... I don't know
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Old 08-18-2012, 08:28 PM   #19
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BAX10 - Let me give a bit of advice to whoever does a lot of the shopping in your household. With young kids, parents spend WAY TOO MUCH money on their clothing - which they outgrow in just a matter of months. Have the wife find great kids clothing at consignment shops, or even thrift stores! Nothing a washer full of hot water and a capful of Tide won't take care of - and nobody knows where they came from anyways! If she started shopping this way NOW with young kids, you guys would save BOATLOADS of money for retirement, college, etc. People spend way too much on things they really don't need to spend so much money on. Like dining out - it's not a thrill for kids today any more because they do it so often! Just leave BELOW your means - don't get caught up with trying to keep up with the Joneses!! Buy a good quality car and maintain it - and drive it into the ground! Years with no car payments are great! And don't buy an expensive car that will cost more to insure and repair! Buy dependability - that's it. Nothing flashy, No gas guzzlers. Just be SMART with your money and keep saving! It's empowering, NOT painful!
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Old 08-18-2012, 09:59 PM   #20
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Recently read two books that may be real helpful in your situation; Your Money or Your Life & Work Less, Live More. Good luck.
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