52.5 and 7 years of the grind remain

[olyveoil]

I too am building dividend payers for future income. 5.5 years left.
I am planning on 5.5% - 9% portfolio growth for next 5.5 years, however. If we don't get it we can work a little longer or live on less.

I like the way you split dividend payers out and also own BDC's (GAIN and NEWT).

Maybe we can chat about watch lists.

 

[Sunset]

Hi,
I have been reading for some time, but decided to dive in with a question about Roth conversions. So - I thought it was time to give some info, and say hi!

My DW and I are both 52, married 23 years now and I plan to retire in a 7 years. I work at a MC in the pharma industry and while my wife and I met in the industry, she hasn't worked for ~10 years. We have an 18 yo daughter in her first year of college, and my wife may go back to work now, but in a much lower stress type situation.......

One concern - Our expenses are higher than I'd like, and I have not been successful in budget/money conversations with my DW. I expect our annual expenses (without mortgage) to be $150k to $175k in 7 years (including increased healthcare), then increasing with inflation from there.

.......

My comment here is reflecting a similar situation of a relative.
A spouse can use the reason of child care when children are young and I feel it's valid (I did it).
But my relatives wife, after kids left home, then claimed she couldn't work because she needed to take care of the dog

I think after 10 years of not working, your DW will have a bit of a difficult time finding a good paying job, and frankly will be VERY reluctant to find a job.
With all her free time, it's no wonder she has time to spend money.

 

[Mike999]

Here is the tough love, sorry in advance. Change your return assumption to 5% and then figure out how you get to the same place by doing real stuff to your savings rate , budget cuts, debt reduction. I think you are planning for disappointment with over reliance on work income and market returns. You control a big income stream at this moment, make the most of it. If market rates & employment continue, you will have a windfall. My advice is overly conservative but I did walk away at 50 with $5mil and live on around $100k. I would wait on Roth conversions for when you stop working and have lower income.

 

[BadgerNCarolina]

Here is the tough love, sorry in advance. Change your return assumption to 5% and then figure out how you get to the same place by doing real stuff to your savings rate , budget cuts, debt reduction. I think you are planning for disappointment with over reliance on work income and market returns. You control a big income stream at this moment, make the most of it. If market rates & employment continue, you will have a windfall. My advice is overly conservative but I did walk away at 50 with $5mil and live on around $100k. I would wait on Roth conversions for when you stop working and have lower income.

Thanks for the advice, I am hearing you and others! I will play around with some more conservative returns over holiday break and see what it looks like.

 

[Time2]

I too am building dividend payers for future income. 5.5 years left.
I am planning on 5.5% - 9% portfolio growth for next 5.5 years, however. If we don't get it we can work a little longer or live on less.

I like the way you split dividend payers out and also own BDC's (GAIN and NEWT).

Maybe we can chat about watch lists.

I have avoided dividends because when I start SS and have RMDs, it will be more income than I need and put me in a higher tax bracket.

Just food for thought.

 

[Dash man]

I have avoided dividends because when I start SS and have RMDs, it will be more income than I need and put me in a higher tax bracket.

Just food for thought.

The dividends will be taxed at 15% (unless the law changes). RMDs and social security income won’t change that, unless of course, your goal is to keep your capital gains rate at 0, then it would effect it.

 

[cyber888]

Good luck with the projections. My finances are very similar to yours, 820K+ in 401K and 230K in IRA+Cash, my home equity is also around $450K - I only have a small Heloc now at 2.24%. But I'm 57 and no kids, and our expenses are around $57K a year (max of $60K), compared to your $150K-$175K. But I think you'll do just fine in 7 years when you get vested.

Hi,
I have been reading for some time, but decided to dive in with a question about Roth conversions. So - I thought it was time to give some info, and say hi!

My DW and I are both 52, married 23 years now and I plan to retire in a 7 years. I work at a MC in the pharma industry and while my wife and I met in the industry, she hasn't worked for ~10 years. We have an 18 yo daughter in her first year of college, and my wife may go back to work now, but in a much lower stress type situation. College expenses should all be paid from a 529 account that we started before my daughter was born (put $20k in there 19 years ago and never put in another penny).

Financials
825K in 401(k)
22K in Roth
75K in a 409(a) deferred comp account
130K in taxable + cash
$450k equity in home (only mentioned because we may downsize and pull some out next spring)

Debt free other than mortgage/HELOC, but plan to have that paid off prior to retiring in 7 years.

My total comp takes a big bump next year, as I get my first set of vested stock bonus (3 years after starting). I will be deferring about 30% of that (should be lump sum of approx $100k-$125k), and using the remaining to pay off a HELOC, then will defer more like 80% the remaining years.

I also defer approximately 10% of salary and 20% of 'regular' bonus.

MC has a VERY generous 401k match of 11.5% if I put in 6%. So - I put in 9-10% (my max) and get approx $50k-$55k total/year.

The plan, and how much my models show us having at 59.5 -
Assuming 10% market increase and the defer/saving noted above:
$2M in 401(k)
$150K in Roth
$1.25M in a 409(a) deferred comp account
$1M in taxable + cash

So - between $4M and $4.5M in investible assets, and no debt. Again, just a model, and a lot can happen in 7 years. The model assumes 1 promotion, which could occur or I could be out of a job in 6 months - life is like that.

One concern - Our expenses are higher than I'd like, and I have not been successful in budget/money conversations with my DW. I expect our annual expenses (without mortgage) to be $150k to $175k in 7 years (including increased healthcare), then increasing with inflation from there.

Concurrently, I have been building a portfolio of dividend producing stocks which I plan to use to cover some expenses. The portfolio is a group of ~10 stocks, including bellwethers and some more aggressive options that return between 6%-8% per year, and have done well over time from an appreciation perspective. With $1M in that account, I expect ~60k-80k/year. My retirement accounts are in SPY and QQQ, so conservatively let's count 1% yield and add another 20k/year.

Oh - and the 409a account pays out 10% for 10 years upon retirement, so that would be ~$150k per year.

I'd like to live off the dividend income + deferred income for the first 10 years of retirement (150+60+20 = 230k, which should cover expenses comfortably) and leave my retirement accounts alone until we hit 70 and SS can replace some of the deferred income, and RMD can/will replace the rest (at 72) and more.

What am I missing?!? I know there is some risk in the model (including staying relatively aggressive in my portfolio at 52), but for now I am good with that approach. I may change that opinion as I get closer to FI, which will of course change the model some. I fully expect that we will have one (or multiple) year(s) where the market will regress and my portfolio won't advance, so I've actually not included the last 2 very positive years in the model.
Last concern for me is that in order for this to work, I will need to stay at my current company for 10 (total) years, which would actually be longer than I've ever been at a company, so that's not a given even though I am highly motivated to do so, like the job (mostly) and really enjoy my colleagues.

Okay - I'm done - thanks for any feedback or questions!