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What are my chances?
Old 01-05-2006, 09:00 PM   #1
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What are my chances?

I'm dreaming of retirement.* I don't want to work till I drop.* I've been playing around with some retirement calculators, plugging in numbers and wishful retirement ages and it seems like retiring early...as in 12 years, might be possible with a little downshifting in lifestyle.* I'd appreciate some feedback from anyone who has more experience at this than I do.* Here are my specifics:

Me: 15% of salary going to 401k, company match 3%.
Wife: 15% going to 403b, receives full pension at age 55, 65% of final average salary.

Combined income $170k. Retirement and other savings: $200k.
House worth $500k, $130k left* on mortgage, 11 years remaining.


Plan would be for me to retire after the mortgage is paid off in 12 years (age 50), wife would continue to work for 7 more years until age 55 when she can take her pension. We would travel during her 10-week summer breaks.* I don't think we'd need to dip into any savings until that time.* At 62, we could tap into SS if it's still around, figure $1k/mth for me and $1,300/mth for her.

Assuming she was ok with me retiring earlier than her, how feasible is this plan?* With no mortgage, we'd have property taxes to pay as well as typical household and standard living expenses which I estimate to be about $5000/month total in todays dollars.

Doable? What am I missing?
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Re: What are my chances?
Old 01-05-2006, 09:56 PM   #2
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Re: What are my chances?

youre fine IMHO
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Re: What are my chances?
Old 01-06-2006, 04:58 AM   #3
 
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Re: What are my chances?

Do you have health insurance thru the teacher's pension? If not, could be expensive . . .
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Re: What are my chances?
Old 01-06-2006, 10:27 AM   #4
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Re: What are my chances?

Two things. First off, if you're 19 years+ away from fully retiring, an asset mix thats expected to return 5% is way too low, and barely ahead of inflation. Second, aside from your 401k contributions what else are you saving?
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Re: What are my chances?
Old 01-06-2006, 10:49 AM   #5
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Re: What are my chances?

Is DW's pension a COLA? If so, with her income (teacher at $100k ) her pension at 65% of final income along with yours would appear to meet most of your expenses assuming they will increase with inflation, that would put them at about (mental math here) $83k/year in 12 years. It looks like you make up the difference in DBPs with your 401(k) and 403(b) accounts. Like () said, you might want to kick up the risk a bit to get a better long term return than 5%. You will need this stash for many years to come and it needs to grow better than inflation or you are going backwards.

You may eventually want to move to a lower cost area unless you really enjoy where you are; it so, then fund your future income to allow you to do that.
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Re: What are my chances?
Old 01-06-2006, 12:14 PM   #6
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Re: What are my chances?

Thanks for the responses.

I should be able to get insurance converage through her plan, which extends through retirement.

As for the 5% returns, I am very conservatively invested right now in money markets, with some international and growth funds, but I anticipate a major correction bigger than 1999 in the near term so I don't want to have all my eggs in one basket.

Currently saving cash each year but am spending on home improvements, usually 10k - 20k per year in projects. Got a major kitchen remodel coming up which will be about 50k so that puts a damper on furious savings plans inn the near term. Still, I hope to add at least 10-20k per year towards non-401k savings account over the next 10 years.
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Re: What are my chances?
Old 01-06-2006, 12:27 PM   #7
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Re: What are my chances?

Quote:
Originally Posted by kjpliny
I anticipate a major correction bigger than 1999 in the near term
C-T...time for your favorite line...
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Re: What are my chances?
Old 01-06-2006, 05:17 PM   #8
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Re: What are my chances?

What I meant to say is I don't have the stomach to see my portfolio take a bit hit, so I'd rather be conservative and expect less return than be "all in" and watch 100k potentially turn into 20k or less after a collapse. I understand people who invest agressively and wait out the downturns, but I'm not comfortable with the swings, especially if there's a possibility of a prolonged downturn in the market caused by retiring baby boomers, high energy prices, rising interest rates, and over-leveraged consumers using the real estate bubble to get cash out of their homes to pay the bills. The future does not look bright to me at the moment, so I'll be happy if I can get a 5% return over the next 30-40 years.
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Re: What are my chances?
Old 01-06-2006, 05:36 PM   #9
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Re: What are my chances?

Quote:
Originally Posted by kjpliny
What I meant to say is I don't have the stomach to see my portfolio take a bit hit, so I'd rather be conservative and expect less return than be "all in" and watch 100k potentially turn into 20k or less after a collapse.* I understand people who invest agressively and wait out the downturns, but I'm not comfortable with the swings, especially if there's a possibility of a prolonged downturn in the market caused by retiring baby boomers, high energy prices, rising interest rates, and over-leveraged consumers using the real estate bubble to get cash out of their homes to pay the bills.* The future does not look bright to me at the moment, so I'll be happy if I can get a 5% return over the next 30-40 years.
Not to belabor the issue....but, you could do much better than 5% with very little additional risk. If inflation goes over 5%, which is has done before, you would be losing money. You don't have to float your whole nest egg on dot coms to get a better return. Many balanced index funds can get you better than 5% on an annual basis with very little additional risk. Of course, you are the one that has to sleep at night and I really understand that all too well. My mother is 83 and I handle her finances...she is very very conservative so it is pretty easy. :
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Re: What are my chances?
Old 01-06-2006, 07:26 PM   #10
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Re: What are my chances?

Making 5% at 83 is a different matter than 38. While its possible there could be a downturn, i'll speak for Cutthroat since he's asleep at the wheel. "More money is lost waiting for the downturn" or something like that.

I was pretty negative on equities the last few years. I just started to think things might be reasonably valued at this point. And i'm the negative nellie around here. We've gone pretty well sideways for a while...while there are a number of potential problems and you can have a fine dark day adding them all up, I'm not sweating equities right now.

You dont lose money until you sell. You wont be selling for a good long time. Pick a good 'sleep at night' allocation that has between 40 and 60% equities and stop looking at it.

Heck even a moribund fund like Vanguards Wellesley spits out over 4% in dividends and has an 8%+ annualized return for the last 35+ years. I dont think they've had two down years in a row and I dont think its ever had a double digit loss in a single calendar year. 40% large cap value, 60% short to intermediate bond. Some portion in cash. I think the expense ratio is under .20 if you own more than 100k worth (admiral shares). If you cant sleep at night with performance like that, with almost double your current rate of returns...
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Re: What are my chances?
Old 01-06-2006, 07:34 PM   #11
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Re: What are my chances?

right on!
32% in stocks seems to do it for me (40 years old) a bit light...but i sleep well and I do have a larger portfolio!
\years ago I was always 80-100% but found myself glued to cnn and the internet following the stock ticker!!!!!!!

~i think you advice is right on though 8)
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Re: What are my chances?
Old 01-07-2006, 03:36 PM   #12
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Re: What are my chances?

That Wellesley fund looks pretty non-volatile...our 401k/403b money is limited in what funds we can choose from...only Fidelity and only a choice of about 12-15 funds. Not sure why companies do that...I guess since they're paying the fees they get to choose.

My brother is an Elliot Wave nut and is always sending me bearish newsletters with dire predictions. A lot of the trend charts are unreal scarey right now. I've always tried to balance my investments and it's a struggle to ignore the contant negativity, especially when many, many growth funds are showing hideous 5 year returns. Reading up on peak oil theory hasn't helped either. An 8% return is probably realistic based on long term market history, assuming there will be economic expansion similar to what we've seen over the past 100 years. Hard to know if it's sustainable over the long term.
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Re: What are my chances?
Old 01-11-2006, 05:06 PM   #13
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Re: What are my chances?

when i do the calculations, i try to be more conservative...
8% seems high as a rate of return for me...
i use around 5% just to be safe...

Do you think this is too conservative. would like to only have 25% exposure to market
rest in short term bonds , cd, mm accts....
again,
need it to sleep at night
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Re: What are my chances?
Old 01-11-2006, 07:09 PM   #14
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Re: What are my chances?

What do you guys think of these two funds for long term growth:

http://quicktake.morningstar.com/Fun...GSMCX&pmts=FS4

http://quicktake.morningstar.com/Fun...FDIVX&pmts=FS4

Figured if portfolio was half super conservative (say 50% bonds/money market) and half agressive (two funds above), might even out over say 20 - 30 years to something closer to 8%. Are they too agressive/volatile?
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Re: What are my chances?
Old 01-11-2006, 08:01 PM   #15
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Re: What are my chances?

Quote:
Originally Posted by kjpliny
What do you guys think of these two funds for long term growth:

http://quicktake.morningstar.com/Fun...GSMCX&pmts=FS4

http://quicktake.morningstar.com/Fun...FDIVX&pmts=FS4

Figured if portfolio was half super conservative (say 50% bonds/money market) and half agressive (two funds above), might even out over say 20 - 30 years to something closer to 8%.* Are they too agressive/volatile?
Why not just go with a balanced fund like Vanguard's Target series or Fidelity Freedom funds? Gives you plenty of diversification with growth potential. Makes life simple too.
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