I think I'm close, what do you think?

[erinsd]

Hi all,
I’ve been lurking for awhile and finally realized that I’m within arms reach of RE. Below is our financial picture, any comments or advice are appreciated.
I’m a 48 y.o. geeky engineer living in SoCal. My wife is a stay at home mom to two college bound boys, 14 and 17.
Assets
401k 523K
Wife’s IRA 31K
Stock 780K (index funds and teck stocks)
ESSP 723K
Co Stock Options 271K (after taxes)
Cash 64K
College 529’s 50K
Total 2.442M

Salary = 130K/yr
Rental income = 10.8K/yr

No debt! Yahoo!
House and cars are paid for. We just completed a major remodel and this is our “forever” house. We live within our means and drive our cars into the ground.

We’re still working on our retirement budget, but so far we’re thinking it will be around 95K/yr, NOT including college expenses. This does include 15K/yr for health ins., hobby $, and a new $40K vehicle every 10yrs.

Most withdrawl calculators give 100% success at a 4% SWR for 40yrs. We’re hoping to keep the budget <95K/yr, so I think we’re close.

I realize we're way overly weighted in company stock, but we're comfortable with the risk at the moment. I'll have to cash out the stock options once I retire, then I'll reallocate according to...not sure yet to be honest, but something like 60% equities/30%bonds/10% cash?....not sure yet. I need to read alot more on AA.

Questions:
1. Is 15K/yr realistic health ins for a family of four used to getting top notch care? No medical conditions except for me (daily meds for ulcerative colitis and a re-herniated disc with no pain).
2. How much should we add for dental ins? One kid currently has paid for braces, the other most likely will not need them.
3. College expenses…still need to figure out best way to cover this without major impact (as most parents do). I guess I have no question here…just thinking out loud. The oldest will most likely go to Cal Poly SLO or a UC school next year. Even though my wife and I had to work, scrape, borrow, and financial aid ourselves thru college (we both were “po” growing up), we’ll assist as much as it takes here.
4. What are techniques for actually generating cash to live on once you retire? i.e., sell a year's living expense worth of stock at the beginning of each year and place in laddered CD’s (whatever their earning), or sell on a as-needed basis, or?

Thanks!
erinsd

 

[GrayHare]

Your numbers are looking good. About question 4, I favor what is called the "bucket" approach. In bucket #1 you keep X years of expenses as cash or CDs. In bucket #2 you keep another X years of expenses in fixed income and/or very conservative stocks. In bucket #3 you put X years of expenses into equities. Whatever is left over you put into equities and/or riskier assets. The idea is your #1 cash bucket has enough money to get you past any downturns in bond and stock valuations so that you don't need to sell them while they are at depressed prices. Web search retirement buckets and you'll find many sites with details and variants.

 

[SRyan]

I've been thinking about your question #3 before my son was born. He is only 17 months now, but I'd like to plan as early as possible; I know how tough it is to work and pay your own way through college and I'd like to afford my kids the opportunity to go get an education without stressing if they can pay the rent and let them skip the fine dining on PB&Js almost every night! One alternative both my wife & I used during our college years was to take most of our lower-level 100 classes through various community colleges. My advice is to see what colleges that university accepts transfers from. This will also afford them the opportunity nowadays to take online classes throughout the weekend and be able to finish their degrees earlier than 4 years; think less room and board, travel, etc… At the end of the day, their degree will still read “University of California, Blank (Blank)”

Another option to cut a large expense is to let your kids live at home if they pick a local university. It may sound too frugal, but pack them lunches and afford them the opportunity to eat dinners at the house.

 

[sengsational]

I'll address the number 3 non-question... You probably already figured that you have too many non-retirement assets to get any financial aid. So the choice between a state school and a private school is huge. Looks like you have about one year's worth in the 529 if it's a private school.

 

[pb4uski]

1. You can price out a family health insurance policy and get an idea whether your $15k budget provision is reasonable or not.

2. Ditto for dental coverage, though many of us self insure dental.

3. There are calculators out there that can give you an idea what your expected contribution to college costs will be. Then it is a matter of how much you fund and how much the kids fund (possibly through loans).

4. It varies, I plan to try to have a target of two years worth of living expenses in cash, and will fill it up when I need to rebalance.

 

[sengsational]

One alternative both my wife & I used during our college years was to take most of our lower-level 100 classes through various community colleges. ...... It may sound too frugal, but pack them lunches and afford them the opportunity to eat dinners at the house. [/SIZE]

For me, I'd rather send my kid away to school as a life lesson. Being on your own at the U offers more, way more, than what you learn in class. Besides, by the time they are 18, you'll be ready for them to be out of he house, hehe!

 

[SRyan]

Being on your own at the U offers more, way more, than what you learn in class.

It could; however, it seems that the piece of paper, a.k.a "degree", is more important than anything you learn anyway
Being away on your own is optimal, but if you're trying to scrape your dough........