Give Me A Grade

[Tommy_Dolitte]

Targeting a 12-15 year retirement date, thinking of changing professions (corporate to teaching).

Current: $138,612 net worth ($47,000 home equity)
Annual expenses: $20,759

Annual contributions:

$14,000 401-K (does not include company match)
$5,000 stock grants (will not last)
$3,000 ROTH (High in consumer goods)
$3,000 non-deductible IRA
$5,000 Index Fund A (High in energy)
$4,000 Index Fund B (High in real estate)
$3,000 Index Func C (High in banking)

God willing, I'm basing all of this without counting bonuses, which in theory could allow for DCA funding of most investments in a good year. Not including future wife's income as well (I'm proposing this year).

Given that I'm very green on tax diversification and am considering a different profession (potentially a 57% reduction in total compensation---gulp--it's like a calling though---and I enjoy giving to kids), is this a feasible plan.

I'm getting to the point where I'm saying, the hell with trying to figure out returns---if I'm able to save in absolute terms a decent amount with the right mix (i.e. tax), should be okay?

I also don't know how to factor pension and soc sec (ha!) into the equation as well.

Thanks,
TD

 

[retire@40]

Annual contributions:

$14,000 401-K (does not include company match)
$5,000 stock grants (will not last)
$3,000 ROTH (High in consumer goods)
$3,000 non-deductible IRA
$5,000 Index Fund A (High in energy)
$4,000 Index Fund B (High in real estate)
$3,000 Index Func C (High in banking)

I'm curious how you do a $3K Roth IRA AND a $3K non-deductible IRA in one year.

 

[Marshac]

Depending on how many years you're thinking about teaching for, you may want to check out the teacher pension plans for your state and see what's in store for you. This may give you a better idea of what's ahead for planning purposes.

Also, make sure you shop around for discounts once you're a teacher. PEMCO offers deep insurance discounts to district employees for example.

 

[Tommy_Dolitte]

Sorry...I alternate which type of IRA I contibute to each year..

 

[haha]

I agree with marshac. If you teach math or science, you likely will never be laid off. If you get a good pension you could even be ahead down the road. It looks like a big pay cut, but you do not need to save as much for retirement. So your spendable income each year could be similar, even in the early years. Not only that, compared to the deadline ridden life of a software guy, teaching can be easy with lots of vacation, etc. One negative IMO is after a few years you likely can not go back to a really technical cutting edge corporate job, because your skills deteriorate.

My brother retired this year at age 52, after 30 years of teaching. He hardly saved anything. He drank, gambled and clubbed his way through life. Along the way he enjoyied 4 divorces. Nevertheless, he managed to keep his pension intact and now he is sitting pretty with almost $60 K pa, health insurance, yada yada.

My other brother and I saved our money, invested reasonably well and came out OK. But we have to keep a more watchful eye on expenses than the one with the pension. And we have to continue to do reasonably well investing.

Mikey

 

[BigMoneyJim]

(Oops posted in wrong thread.)

 

[bongo2]

Since no one else wants to -- I'll give you a B+.

High marks for frugal living (very frugal -- I'd like to see how you do it, actually), index fund investing, tax advantaged investing, and accumulated wealth.

Points off for using a traditional IRA if you qualify for a Roth, and investing only in sector funds (no broad market holdings).

I think that if your income drops 57% and you don't change your spending, then your annual investing will go to about zero.

 

[John Galt]

Jeez Mikey, I spent most of my money on wine women and song too, and I don't have a pension.
Still makin' it though

Back to the original post. I'm going to give him an A just for
thinking about this stuff. A lot of folks never do.

JG