Hello all. I'm hoping to get some advice on how I'm doing with my retirement planning and what I could do differently/additionally. This will be long-winded, so bear with me.
I’m a family practice physician in the USA. I'm married, 36 years old, and just finished residency and started practicing late last year. My wife is 38 and is a college professor at a state university. She's on a tenure track, but still pretty low on the pay scale, with significant pay increases to come as she gets tenure and gets promotions. We have four kids that range from newborn to 16 years old.
Annual Income:
Me:
Salary $240,000
National Guard drill pay $15,000
Loan repayment (Guard and employer) paid directly to student loans: $75,000
Wife:
Salary: $75,000
Total annual gross earnings (excluding loan repayment paid directly to loans) $330,000
Assets:
My current 401k: $10,000
My old 403B from residency: $25,000
Our brokerage account: $50,000
Her current 403B: $10,000
Her old 401K: $70,000
Her mutual fund: $100,000
Home value: $300,000
Total assets: $565,000
Liabilities (the worst part of our financial picture):
My student loans: -$440,000
Her student loans: -$50,000
Mortgage: -$200,000
Total liabilities -$690,000
Total Net Worth -$125,000
Retirement annual contributions:
My 401K $28,500 (including employer matching)
Brokerage account: $12,000
Her 403B: $19,000
Total annual contributions: $59,500
Defined benefit pension estimates:
Social security (both of us, rough estimates): $65,000
Army National Guard pension: $35,000
Her College pension: $90,000
Total pension: $190,000 in today’s dollars
Our biggest downfall right now is our negative net worth in our mid to late 30s and our late start to aggressively saving. Unfortunately that’s a biproduct of large educational expenses and many years of low earnings prior to getting our professional degrees. We’re pretty aggressively paying these loans down, with help from student loan repayment programs through the army and my job, we’re on track to have these paid off in just under 6 years, and hope to have a positive net worth in about a year from now. We’re paying out-of-pocket about $25,000 after taxes per year toward student loans. Once they’re paid off, we’ll add about half of that to retirement savings and the other half toward paying off our mortgage, which currently has 25 years to go (and we're planning to move once student loans are paid off, so the additional will go to that mortgage).
After figuring in student loan repayments (and the large tax bill that comes from the $75k annually paid to the student loans) and retirement savings, we realistically live off of about $120k net income annually, which is very comfortable for us. With four kids and us both working full time, child care costs are quite high for us. We could definitely decrease discretionary spending, but I don't know that either of us really want to. We both spent a lot of time living lean, and know how to, and not having to do that is really nice right now. We're also not living above our means by any extent.
I know that most experts recommend planning to live off of roughly 80% of pre-retirement income. However, we have grand plans of traveling the world throughout our retirement and would like to retire with more income than we have pre-retirement. How much more? We don’t know. That figure has been tough to nail down for us. And I know that really determines everything...
Assuming we continue our course, I’m very confident that we’ll enjoy a great retirement financially. However, all of the defined benefit estimates are based on retiring at age 67. In fact, I’ve never really considered that retiring earlier than normal retirement age would be a possibility. However, we’ve been recently discussing the idea of retiring earlier, in our mid to late 50s. If I lower that to 55, we’re looking at only 2/3 of our expected defined benefit pensions, and that’s if we wait to take them until normal retirement age. If we take them early, our expected defined benefits would be even less, maybe even half. And we’d have to fill that gap between retiring and collecting benefits 100% with savings, and those savings would obviously be much smaller with a decade less of compounded interest and contributions.
Unless we want to significantly change our financial retirement goals, I don’t know that early retirement is in the cards more than a couple of years. I guess we have to determine what’s more important to us: retirement income or good years in retirement…
I’m just hoping to get some feedback, advice, etc. from the group here. I’m planning to set up a meeting with a financial planner so that I can go over things in more detail and get a better idea of where we stand and what our options are. But in the meantime, I know there is a ton of great experience here in this forum, that I’d love to tap into.
If you stuck around and kept reading until the end, thanks and cheers!
