Thinking ahead

[Illinois guy]

Hello everyone this is my first post and I figured I would post in here because I am 29 years old, and I plan to retire at 47 years old in April 2032. I turn 30 in September.

I have been a peace officer for seven years and I have stayed away from debt, saved, contributed to a pension plan, and started an additional savings plan that is guaranteed 7.5% interest. (My pension is 95% funded even with the bad economy, and it is not backed by or does it take any state money. It consists of my contributions, my employers contributions, and investments) I also still pay into social security, so hopefully I will get something later even if it's reduced.

I will have about $90,000 saved in cash in September 2014. Starting in April 2015 the future wife and I will be able to save $3,500 a month for 17 years, with plenty of money left for bills, groceries, spending, entertainment, etc. At 47 years old we would have equity in a townhouse, the wife's 401k, savings, and I would be able to collect my pension at 50.

My savings: $90,000
Combined savings: $714,000
Estimated TH equity: $100,000
Additional savings plan: $260,000 (after taxes, can also be an annuity)

Total: $1,164,000

We do plan on taking a year or two off then we would both go back to work part time. At 50 years old, my pension will be about $65,000 a year. The wife will have her 401k later, and we would both have social security.

We are NOT having kids

Any comments or helpful tips.

 

[Hermit]

Welcome to the forum!

With a 17 year timeframe to RE, you should be fine. If you properly allocate your savings between taxable, tax deferred (IRA/401k, etc.), and tax free (Roth) accounts, you should be FI and only go back to work after 50 if you want. You would need enough accessible funds in taxable accounts for support until you can tap other funds without penalty. A big item is if your pension has a COLA. Put all your info in FIREcalc (at the bottom of the page) and see what it says.

 

[timwalsh300]

It's unclear if you adjusted all of your numbers for inflation or not. It sounds like you are talking about your $3,500/month savings in today's dollars (with zero real investment growth), but what about the $65k/year pension at age 50, or the 7.5% interest savings plan?

If that $65k/year is in today's dollars, I would be more concerned about that being reduced than Social Security. That's a lot of money, and most defined benefit pension plans use very optimistic assumptions for growth in order to claim that they are "95% funded." According to last year's Credit Suisse Global Investment Returns Yearbook, the average US corporate pension plan holds just 48% of its assets in stocks, yet expects total real returns of 5-7% over inflation, which I find scary. Similarly, I'd be wary any product offering a "guaranteed 7.5%" return.

Tim

 

[iam21177]

I don't have much to say on the details of your plan (others can probably ask better questions than I could), but I wanted to say we are also in the kid-free camp as well. We are 37 and 35. PS - what does your line of work entail as peace officer?

 

[Illinois guy]

Welcome to the forum!

With a 17 year timeframe to RE, you should be fine. If you properly allocate your savings between taxable, tax deferred (IRA/401k, etc.), and tax free (Roth) accounts, you should be FI and only go back to work after 50 if you want. You would need enough accessible funds in taxable accounts for support until you can tap other funds without penalty. A big item is if your pension has a COLA. Put all your info in FIREcalc (at the bottom of the page) and see what it says.

My pension does have COLA. With the lump sum in savings, no debt, the pension, the wife's 401k, a couple part time jobs, and social security we should be ok. Hoping and praying we stay healthy!!

 

[panacea]

Your finances are quite impressive. Two questions off the top of my head:

1) what investment vehicle can you get 7.5% guaranteed and how do I get me some of that??

2) Prenup?

 

[Illinois guy]

It's unclear if you adjusted all of your numbers for inflation or not. It sounds like you are talking about your $3,500/month savings in today's dollars (with zero real investment growth), but what about the $65k/year pension at age 50, or the 7.5% interest savings plan?

If that $65k/year is in today's dollars, I would be more concerned about that being reduced than Social Security. That's a lot of money, and most defined benefit pension plans use very optimistic assumptions for growth in order to claim that they are "95% funded." According to last year's Credit Suisse Global Investment Returns Yearbook, the average US corporate pension plan holds just 48% of its assets in stocks, yet expects total real returns of 5-7% over inflation, which I find scary. Similarly, I'd be wary any product offering a "guaranteed 7.5%" return.

Tim

I put ten percent of my salary into my pension and my employer matches it. The two portions together will equal a few hundred thousand dollars over my career. I guess we will have to see

 

[Illinois guy]

I don't have much to say on the details of your plan (others can probably ask better questions than I could), but I wanted to say we are also in the kid-free camp as well. We are 37 and 35. PS - what does your line of work entail as peace officer?

I call it childfree!! I like kids, I have two nephews and she has two nieces and a nephew. I just don't want my own.

Peace officer is a police officer, however I don't personally like the word police. In the IL statutes, they use 'Peace officer'. My motto is create peace!

 

[Illinois guy]

Your finances are quite impressive. Two questions off the top of my head:

1) what investment vehicle can you get 7.5% guaranteed and how do I get me some of that??

2) Prenup?

It's an additional savings plan with my pension plan.

Prenup? Already got it covered! Lol. That reminds me I better get on it, a little less than 6 months to the wedding. She doesn't like the idea but I explained to her that it's just insurance, and if we never separate then it doesn't really mean anything. I only really care about my pension, the additional pension savings, and my premarital savings. Anything else we will have joint ownership. It sucks but the anti male courts have really made people be more careful

 

[dvalley]

You're doing the right thing with a prenup. Ask me how I know? ...ok since you asked:

$120k cash equalizing payment
$46k child support (with 50/50 custody)
$58k alimony
$63k lawyer bills

Financially this set me back about 10 years...more if you count the lost compounding of 10 years worth. Of course, I never thought a divorce would ever happen to us.

 

[braumeister]

Prenup? Already got it covered!

You're probably on top of this, but it's important to have a competent lawyer make certain the prenup is legal. States have very specific requirements.

 

[Illinois guy]

You're probably on top of this, but it's important to have a competent lawyer make certain the prenup is legal. States have very specific requirements.

Yes. I'm having a licensed illinois attorney draft up the pre nup and the fiancé is getting a separate attorney to "explain" (read) the pre nup to her so she "understands" what it says. All the research I have done says to have the fiancé have an independent attorney "represent" her in explaining the stipulations before she signs off on it. Believe me I have researched how to make pre nup hold up in court in the event of separation.

 

[Illinois guy]

You're doing the right thing with a prenup. Ask me how I know? ...ok since you asked:

$120k cash equalizing payment
$46k child support (with 50/50 custody)
$58k alimony
$63k lawyer bills

Financially this set me back about 10 years...more if you count the lost compounding of 10 years worth. Of course, I never thought a divorce would ever happen to us.

Thanks for the response.

We are not having kids and she has a good job of her own.

There would be no child support and I doubt there would be any alimony as she makes 65k, a little less than me. I also plan on having many hundreds of thousands in savings that would be split 50/50 in the event of separation. With the pre nup, there shouldn't be any lawyer bills.

 

[splitwdw]

You are getting a pre-nuptial on, the <90k in savings, whatever is in your pension and other pension savings? You don't have the projected/planned 1,164,000 total. The bulk of your projection is possibly saving 714k between the two of you over 17 years and maybe 100k in equity in a townhouse that you don't own yet. So you have about 350k right now? Is that worth a pre-nup? Not that 350k is anything to sneeze at.

 

[Illinois guy]

You are getting a pre-nuptial on, the <90k in savings, whatever is in your pension and other pension savings? You don't have the projected/planned 1,164,000 total. The bulk of your projection is possibly saving 714k between the two of you over 17 years and maybe 100k in equity in a townhouse that you don't own yet. So you have about 350k right now? Is that worth a pre-nup? Not that 350k is anything to sneeze at.

A $65,000 yearly pension, taken at 50 years old, multiplied by 30 years is $1,950,000. Half of that is $975,000. Half of the additional pension savings in the future would be $130,000 or so after taxes.

The pre nup is protecting more than a million dollars in future assets.

 

[redduck]

A $65,000 yearly pension, taken at 50 years old, multiplied by 30 years is $1,950,000. Half of that is $975,000. Half of the additional pension savings in the future would be $130,000 or so after taxes.

The pre nup is protecting more than a million dollars in future assets.

You better hope your wife-to-be is not reading this thread.

 

[Illinois guy]

You better hope your wife-to-be is not reading this thread.

Got it covered