Savings goals

[Bimmerbill]

I've ramped up my savings this year and am now maxing my 401K. Not really saving more than that tho.

I have 11 years to minimum retirement age, or 15 if I want to retire at 60 with full bennies and unreduced pension.

How do I know I am on track savings wise? Use my AGI? Take home pay? What are some good measures to use?

I have a good handle on my living expenses, but have no clue what they will be in 10+ years.

What is useful in ballparking an estimate?

 

[Animorph]

Is this a trick question? Seems like a basic question for someone who's been here as long as you.

Do your best to estimate your expense changes in 10 years. If you don't expect any big changes (kids in college, big remodel, new cars...), then use your current expenses. Otherwise throw in some adjustments for stuff you know is coming.

Subtract off your expected pension in today's dollars, or inflate your expenses by 3% a year or whatever to match what you do know about your pension. You can do the same for Soc Sec, but you'll need to use some savings to bridge the gap between retirement and start of benefits.

The remainder of your expenses must be met from savings. The 4% rule applies here, so you need, very roughly, 25 times your expected remaining expenses saved by the time you retire. When you reach that, you can consider retiring.

Since it's all estimates of what will happen in the future, there is not a lot of precision. Mostly just what you feel comfortable with.

 

[Bimmerbill]

I think I am suffering from analysis paralysis or something. I think I have a "good" handle on my plan, but recently I've become a bit unsure.

 

[pb4uski]

What does Firecalc tell you?

If you've entered your situation into Firecalc, including your current rate of saving and the result is a high success rate, why worry?

 

[Midpack]

Good answer, I added one thing based on the OP

Is this a trick question? Seems like a basic question for someone who's been here as long as you.

Do your best to estimate your expense changes in 10 years. If you don't expect any big changes (kids in college, big remodel, new cars...), then use your current expenses. Otherwise throw in some adjustments for stuff you know is coming.

Subtract off your expected pension in today's dollars, or inflate your expenses by 3% a year or whatever to match what you do know about your pension. You can do the same for Soc Sec, but you'll need to use some savings to bridge the gap between retirement and start of benefits.

The remainder of your expenses must be met from savings. The 4% rule applies here if you retire at age 65, use 3-3.5% for retiring at age 55-60, so you need, very roughly, 25 to 33 times your expected remaining expenses saved by the time you retire. When you reach that, you can consider retiring.

Since it's all estimates of what will happen in the future, there is not a lot of precision. Mostly just what you feel comfortable with.

 

[mickeyd]

How do I know I am on track savings wise?

Her's how I did it~save 'till it hurts; then save more. You never really know until the end, but you can't go back and fix it if you are short of savings/investment. That's a rule.

 

[Bimmerbill]

Because you indicated a future retirement date (2023), the withdrawals won't start until that year. Your contributions will continue until then. The tested period is 11 years of preretirement plus 34 years of retirement, or 45 years.
FIRECalc looked at the 96 possible 45 year periods in the available data, starting with a portfolio of $200,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 96 cycles. The lowest and highest portfolio balance throughout your retirement was $200,000 to $9,848,779, with an average of $2,845,527. (Note: values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 45 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.
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I am having trouble figuring out the income streams from my pensions. I put them in as current value, right? FIRECALC will apply COLAs to them? Say I am going to get $7200 a year pension, I put it in as $7200 even tho it will be higher since its COLA adjusted and wont pay out until 2026?

 

[martyp]

I retired 15 months ago with the basic philosophy that I really don't know what is going to happen 10 years from now. However, 6 months before retirement, I set up a spreadsheet to track monthly expenses for the next 25 yrs. You can then add a row for %increase from month to month. This way you can model any future pattern you want. The key is being comfortable with your own forecast. Some things you know for sure, like when your mortgage is paid off. Other things like entertainment, travel, house repairs, medical expenses are total crap shoots. You have plenty of time really get a handle on your current expenses. Some things are hidden like saving for a new car, house painting, a new water heater etc. These things only happen every few years or decades but you need to budget for them. Getting a handle on what my expenses REALLY were gave me the confidence to pull the ER trigger. I will say, though, that there will be some things about retirement life you will never know until you just do it.