My update after almost 6 years... still on track... I think?

[piranha]

Below the dotted line is the last post I made on this forum close to 6 years ago. It's funny how some things have changed while others haven't. Doing this mostly for myself... but would appreciate comments as to whether my age 48 goal is still realistic.

Current situation as of 3-30-2013:

Wife (42) and I (40) teach in public schools. I've been teaching for 17 years and bought 5 additional years of service towards my retirement... so I have 22 years of service in the public school system in my state. Our combined annual income is around $160,000. We 3 kids (12, 11, and 6).

Only debt is around $125,000 left on the mortgage (10 year fixed at 3%... will be paid off by the time I turn 47 if we keep adding extra to the principal at the current clip).

Rainy Day fund in bank (Money Market) totaling $30,000.
One new vehicle (paid off in cash), but I'm still driving the 99 Grand Cherokee.

Non Retirement investments (Mutual Funds and DTE Stock) totaling roughly $200,000

403b investments totaling $320,000

Roth IRA investments totaling $165,000

Approximate educational investment for all 3 kids totaling $90,000

For me... the plan remains to retire at 48 years old. That's when I'll be eligible (as long as things remain how they are now) for an annual pension (45% of my salary at the time) with close to full benefits, and won't have any more house payments to worry about. my wife will not be eligible for a full pension until her mid 50's due to time off with kids. She still laughs at me when I say I plan on retiring that early. My reply continues to be wait and see... wait and see.

I realize I was probably overly optimistic with hitting the 2 million $ level before retiring... but think 1.5 million is realistic.

Still scared about the cost of college continuously rising, and would like to be able to provide my children with the opportunity to enter the working world debt free.

I've toyed with firecalc and my plan appears to still be attainable... but would like to see what some experts here think.




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07-18-2007, 08:30 PM

Wife (36) and I (34) teach in public schools. 3 kids (6, 5, and 10 months).

Only debt is around $190,000 left on the mortgage (30 year fixed at 5.375% that we'll have paid off by the time I turn 47 if we keep adding extra to the principal at the current clip).

Approximate rainy day fund in bank (CD's and Money Market) totaling $35,000.

Both of our vehicles are getting older (99 Grand Cherokee and 00 Mercury Villager) so we need to have some liquid assets just in case.

Approximate retirement investments (mutual funds in 403-b and Roths) totaling $250,000

Approximate non retirement investments (mutual funds and DTE stock) totaling $185,000

Approximate educational investments for kids (Coverdell IRA's and 529's) totaling $40,000

Currently, the wife and I are putting away 23 Grand a year total. She hasn't worked for around a year now (been off with the new baby), and will not go back to work for another year.

A breakdown of yearly contributions...
12 Grand in my 403-B accounts
4 Grand apiece in Roth accounts
3 Grand total towards children's college accounts.

For me... the plan to retire is at 48 years old. That's when I'll be eligible (as long as things remain how they are now) for a pension (45% of my salary at the time) with close to full benefits, and won't have any more house payments to worry about. Wife will not be eligible for a full pension until her mid 50's due to time off with kids. She laughs at me when I say I plan on retiring that early. My reply is always wait and see... wait and see.

As far as an actual goal... We'd like to hit the 2 million $ level before I retire. I'm fairly confident that with 13.5 years to go, We should be able to pull it off if we keep saving at this rate (and eventually getting extra contributions from my wife when she does go back to work).

It's the cost of college that scares me the most. My parents paid for my college (and I'm eternally grateful for it), so I'd like to do the same for my kids and let them start out in the working world as debt free as possible.

 

[pb4uski]

How much do you need to live the way you want to live in retirement? Where will those fund come from?

One thing about retiring early is that it is important to have penalty-free sources of funds be it pensions, taxable accounts, a hardworking DW or whatever.

 

[heeyy_joe]

Nice. You are still on track.

 

[piranha]

How much do you need to live the way you want to live in retirement? Where will those fund come from?

One thing about retiring early is that it is important to have penalty-free sources of funds be it pensions, taxable accounts, a hardworking DW or whatever.

I'd like to live the same lifestyle I'm living right now. I figure my house payment being gone in 7 years should account for most of the 55% of my salary that I'll be losing by not working.

My pension (45% of my salary) + my wife's full salary for another 5 years or so (we'll be in our mid 50s when she retires with a similar pension to mine) will hopefully allow us to maintain the same lifestyle.

We certainly don't plan on going on a dozen trips a year or anything like that.

 

[bob boag]

The dogwhistle I hear is that you plan to retire when you're 48 (very young) and your wife has to keep slogging until she's 55. She's got two years on you so that mitigates it a bit. I could envision some animosity.

 

[piranha]

Bob: You hit the nail on the head. I keep telling her to think about all those great meals I'll have the time to prepare and the projects I'll have time to get done.

A couple other pieces of information to provide more detail.

Combined... we're currently saving around $21,000 a year in 403b accounts, $10,000 in Roth accounts, and $6,000 in college accounts.

 

[Rambler]

I dunno. I think I would be planning to work until she is ready to call it a day. After all, even though she took time off to care for the kids, that is just as much or more of a full time job as working at a compensated post. If you were to work until she was 55, you would be 53 (still qualifies as "early retirement"), you would have that much more in assets set aside, would be that much more comfortable in retirement, would save the potential for animosity, and, your 6 year old would be 19 and most likely out of the house, or at least would be much more independent than a13-14 y.o. Some families do better than others with one spouse retiring early, and the other continuing to work. It seems to me that your DW would much prefer to retire at around the same time you do. YMMV.

R

 

[Jay_Gatsby]

I dunno. I think I would be planning to work until she is ready to call it a day. After all, even though she took time off to care for the kids, that is just as much or more of a full time job as working at a compensated post. If you were to work until she was 55, you would be 53 (still qualifies as "early retirement"), you would have that much more in assets set aside, would be that much more comfortable in retirement, would save the potential for animosity, and, your 6 year old would be 19 and most likely out of the house, or at least would be much more independent than a13-14 y.o. Some families do better than others with one spouse retiring early, and the other continuing to work. It seems to me that your DW would much prefer to retire at around the same time you do. YMMV.

R

+1 The point is that your wife is your partner. Your retirement schedule will still be subject to her working schedule, which means no "drop everything for that last minute great vacation deal."

As for the maternity aspect, I actually think the OP is entitled to take some time off, provided he shoulders a similar child-rearing burden. Such burden won't exactly be the same as raising infants/toddlers, but ask any parent and you may find they'll say teenagers are no less stressful. Add in the "after school taxi service" and you likely have a similar situation.

 

[EvrClrx311]

+1 to the previous two posters.

I always envisioned retirement as being a plunge I'd take with my wife together. I'd gladly sacrafice another 2-3 years at my job, if it got her out of hers 2-3 years sooner. I'm sure the same would be true flipping roles.

Unless of course one spouse 'loves' their job and the other does not. There is never a one size fits all. You are the only one that can effectively evaluate your circumstances.

 

[piranha]

+1 The point is that your wife is your partner. Your retirement schedule will still be subject to her working schedule, which means no "drop everything for that last minute great vacation deal."

As for the maternity aspect, I actually think the OP is entitled to take some time off, provided he shoulders a similar child-rearing burden. Such burden won't exactly be the same as raising infants/toddlers, but ask any parent and you may find they'll say teenagers are no less stressful. Add in the "after school taxi service" and you likely have a similar situation.

We've been married for 15 years. We started teaching at the exact same time. She took close to 5 years off total to raise our kids in the first few years of their lives and will not get retirement credit for that. She wants to retire with her full 30 years in as well to ensure she gets full health care coverage down the road if I were to pass on before her.

As far as the child-rearing stuff goes... it's definitely something that has been a split as far as responsibilities go. Early on in their lives, she shouldered most of the load... but now that she's back at work (and as an elementary school teacher... get off of worker later than me... a high school teacher), I do most of the driving around (kids are in assorted activities... mainly travel soccer), household stuff during the week (she does on weekends), and grocery shopping.

My wife is more concerned that it is a financial stretch for me to retire that early. I show her the #'s, but she doesn't seem to believe them. I'm considering making an appointment with a financial planner through our bank (to review our portfolio) simply for her to see an independent 3rd party opinion on the financial feasibility of me retiring early so she'll hear it from someone else. That said... I'm not overly excited that person trying to sell me on their financial products or simply shooting down my plan as unrealistic because of my age. At this point... it's probably still too early to do anything like that. Probably should wait until I'm about 45 to start trying to seriously convincing her of it.

As far as our profession goes... we both love teaching. My wife stresses out more than me about classroom type stuff. I'm getting more frustrated with all of the BS surrounding the occupation (less meaningful days covering content with students... more days on worthless "professional development" with specialists/administrators constantly trying to justify their jobs by promoting and requiring you to provide proof that you are implementing the latest time-consuming, touchy-feely techniques in your classroom). If I could just teach and not jump through hoops... I wouldn't be as interested in "getting out" as quickly as possible. The jumping through hoops started 7-8 years ago and has only gotten progressively worse since then.

 

[Mulligan]

I'd like to live the same lifestyle I'm living right now. I figure my house payment being gone in 7 years should account for most of the 55% of my salary that I'll be losing by not working.

My pension (45% of my salary) + my wife's full salary for another 5 years or so (we'll be in our mid 50s when she retires with a similar pension to mine) will hopefully allow us to maintain the same lifestyle.

We certainly don't plan on going on a dozen trips a year or anything like that.

I have been married to a woman before, and I have bought education years so I could retire early. But I never would have been able to have bought years and been married at the same time. You are fortunate. I have had many girlfriends, including the one now, and there is no way I could have pulled that off. Congratulations! I assume based on your pension ratio payout, you are able to draw SS?

 

[piranha]

I have been married to a woman before, and I have bought education years so I could retire early. But I never would have been able to have bought years and been married at the same time. You are fortunate. I have had many girlfriends, including the one now, and there is no way I could have pulled that off. Congratulations! I assume based on your pension ratio payout, you are able to draw SS?

I bought my 5 years of service at age 23 (around 2 years before I got married) based on my 1st year teaching salary (when I was still living at home with the folks and had very limited expenses). I was given that advice by senior teachers at the time... and it was the absolute smartest financial decision I've ever made.

The answer to the SS question is yes.

 

[Mulligan]

I bought my 5 years of service at age 23 (around 2 years before I got married) based on my 1st year teaching salary (when I was still living at home with the folks and had very limited expenses). I was given that advice by senior teachers at the time... and it was the absolute smartest financial decision I've ever made.

The answer to the SS question is yes.

Yes, that was very smart. Buying at the cheap end of the salary schedule while benefiting on the back end of the salary schedule when you retire. They didn't pass the law to allow me to buy my social security worked years until the end of my career, so the payout was more ER than financial. I am disappointed though...I wanted to hear you say you purchased them while married with a wife who enthusiastically supported it!

 

[obgyn65]

I agree with this.

Nice. You are still on track.

 

[LitGal]

Wow!

I bought my 5 years of service at age 23 (around 2 years before I got married) based on my 1st year teaching salary (when I was still living at home with the folks and had very limited expenses). I was given that advice by senior teachers at the time... and it was the absolute smartest financial decision I've ever made.

The answer to the SS question is yes.

Those senior teachers did you a huge favor! In an effort to boost my teacher's pension, I bought 5 years after leaving the state (when my final salary was permanently "locked in"). I could have saved thousands of dollars by following the advice your received. Congratulations!

 

[EvrClrx311]

At this point... it's probably still too early to do anything like that. Probably should wait until I'm about 45 to start trying to seriously convincing her of it.

I think that is a good idea; wait a few more years before making an issue out of this since it sounds like she is pushing back already. So many things can change between now and then. You might convince yourself you can retire and then be a huge let down if the economy tanks. Also pushing the idea now might cause her to develop a strong opposition to it regardless of the numbers... and then even if the numbers work out she will have already convinced herself you shouldn't. That would put you in a lose-lose.

You can't effectively project what will happen between now and then with your investments. Best to just throw the idea out there as something you're 'dreaming' about and would like to evaluate as the time approaches. When that time comes, lay out a spreadsheet showing the differences in retirement if you left at 48 vs. 50 vs. 52

I'm sure then you both can look at those numbers and decide. Are the extra 2-4 years worth the small additional benefit they'll bring to your both in retirement?

 

[laurence]

If she's on board with you staying home, go for it! But if you have any inkling of possible resentment I think I'd hold out. A switch to a lower paying but more rewarding job might be an alternative. My friend's wife switched to teacher's aid and that's worked out well.

I try to pitch me staying at home in five years when I'm 43, talking about home cooked meals, having the martini ready and the kids homework done (they'd be 7, 10, and 13 then) and DW just gives me the stink eye! Right now we still are looking at me retiring when I'm 55 and she's 53, together.

As far as the math goes, it seems o.k. - 4% = $60k plus ~$40k pension? Or is the idea that you'd leave the money alone until she retires, and just live off her income and your pension until she's 55?

 

[piranha]

As far as the math goes, it seems o.k. - 4% = $60k plus ~$40k pension? Or is the idea that you'd leave the money alone until she retires, and just live off her income and your pension until she's 55?

We probably wouldn't have to withdraw anything until she retired and live pretty close to the exact same lifestyle if I'm figuring this out correctly. See if this makes sense...

*** Right now... we take home about $7000 a month between both of us.
Let's assume that figure stays the exact same 8 years from now.
*** If I retire, we would take home $3500 (her net) + $1600 (about 45% of my current net).... so $5100 per month.
*** Our biggest monthly expense is our mortgage... which we pay $1700 a month on (extra going towards principal)... that will be paid off by the time I retire.

So... and this is really simplistic... the difference between what we take home now after paying our mortgage ($7000 - $1700 = $5300) vs. what we would take home then ($5100 with no mortgage) is pretty negligible right?

That doesn't even include me not contributing to a 403b anymore (currently around $900 a month pre tax) and having that extra $$$ get added to our net income per month.

Does that all make sense?

Basi

don't have all of the #s figured out exactly... but right now

 

[laurence]

Sounds pretty good...is the pension COLA'd?

 

[Lagniappe]

We probably wouldn't have to withdraw anything until she retired and live pretty close to the exact same lifestyle if I'm figuring this out correctly. See if this makes sense...

*** Right now... we take home about $7000 a month between both of us.
Let's assume that figure stays the exact same 8 years from now.
*** If I retire, we would take home $3500 (her net) + $1600 (about 45% of my current net).... so $5100 per month.
*** Our biggest monthly expense is our mortgage... which we pay $1700 a month on (extra going towards principal)... that will be paid off by the time I retire.

So... and this is really simplistic... the difference between what we take home now after paying our mortgage ($7000 - $1700 = $5300) vs. what we would take home then ($5100 with no mortgage) is pretty negligible right?

That doesn't even include me not contributing to a 403b anymore (currently around $900 a month pre tax) and having that extra $$$ get added to our net income per month.

Does that all make sense?

Basi

don't have all of the #s figured out exactly... but right now

Basi,

I completely followed you until the last part. Are you stopping your 403b contributions now, and saving the money post tax? The money gets added to your net worth now, and it will get added if you save it post tax.

If you meant that you will no longer be funding this after retirement, I don't understand how this relates to your income. Everything you shared was net of taxes and contributions. So how will you have more money after retirement to make up that $200 per month shortfall?

L.

 

[piranha]

Basi,

I completely followed you until the last part. Are you stopping your 403b contributions now, and saving the money post tax? The money gets added to your net worth now, and it will get added if you save it post tax.

If you meant that you will no longer be funding this after retirement, I don't understand how this relates to your income. Everything you shared was net of taxes and contributions. So how will you have more money after retirement to make up that $200 per month shortfall?

L.

First of all... the last 2 lines of my post... starting with Basi... should have been omitted. I apologize for that... shouldn't have hit submit without deleting that from my original post.

Allow me to attempt to clarify the last part.

I am not stopping my 403b contributions now. My net income per month right now is $3500.

When I retire... I will be stopping all 403b contributions (about $900 per month off of my gross income) That... by itself... should increase my retirement net income by well over $200 per month.

To summarize (and sorry if this is confusing... I'm an amateur at explaining this... and I might even be totally wrong).... My pension is based on 45% of my gross income. I get that I'll still have taxes that get taken out of my check. That said, my current net income is much lower than it would be if I didn't contribute to a 403b... so my retirement net income will be... in reality... more than 45% of my current net income.

Does that make sense?

 

[piranha]

Sounds pretty good...is the pension COLA'd?

yep... up to 3% per year.

 

[Lagniappe]

To summarize (and sorry if this is confusing... I'm an amateur at explaining this... and I might even be totally wrong).... My pension is based on 45% of my gross income. I get that I'll still have taxes that get taken out of my check. That said, my current net income is much lower than it would be if I didn't contribute to a 403b... so my retirement net income will be... in reality... more than 45% of my current net income.

Does that make sense?

Yes, you are just saying that your net pension is not 45% of your current net, but 45% of your gross minus taxes. The difference is well in excess of $200 because you will not be making 403b contributions.

Makes sense to me.

 

[aida2003]

+1 The point is that your wife is your partner. Your retirement schedule will still be subject to her working schedule, which means no "drop everything for that last minute great vacation deal."

As for the maternity aspect, I actually think the OP is entitled to take some time off, provided he shoulders a similar child-rearing burden. Such burden won't exactly be the same as raising infants/toddlers, but ask any parent and you may find they'll say teenagers are no less stressful. Add in the "after school taxi service" and you likely have a similar situation.

I also agree that maybe you should wait couple more years longer before letting your DW pull the wagon alone.

 

[uc_brian]

Cost of education could rise faster and eat up the 90k fast.

Currency inflation and a melt down of the usd over the next 10-15 years could pose a serious risk to the pension, even if it is index to inflation (b/c the true and index figures never match)

It's still probably worth the risk as you get 'time' that is yours; ER.