New here, 47 with 8 yrs to go. (I hope)

[almost there]

Great to be here!

Am doing all I can, but wonder if its enough?
Always max out my 401k, max out (2) Roth IRA's
home is paid off, still worried about being able to retire in 8 yrs.
It seems the Stock market will dictate if I can retire.

Looking for about $50k per yr adj. for inflation.

Yes my semi aggressive port's are down right now.

$300k 401k, $55k Roth IRA, $300K pension at 55 with 1/2 lowest cost medical option after 33 yrs with the Co. Have an xtra $10k annually. Last year it went into a CD.

Better options for the xtra $10k per year?

A rental in my area still does not pencil out. So real estate does not seem to be an option.

Thoughts?

Thanks!

 

[jIMOh]

50k income, age 55 retirement, I would suggest trying to accumulate about 1.25 M

You have 355k now which could be 710k in 8 years. ~1 M if you include pension. You need to get one more double (from the 710k) to be in ball park. Is the pension adjusted for inflation?

You have 8 years to go, you did not mention what tax bracket you are in. My suggestion would be take the 10k and invest it in equities- dividend payers at that- and attempt to get 80k invested which yields 3-5%. This would provide another 5k of income plus or minus (without compounding even factored in). This would increase your taxes for next 8 years, but would also give you more flexibility in withdraw techniques once early retirement starts. For example it might allow all the money in a 401k to be slowly converted to a Roth at 15% tax bracket before age 70.5- meaning once in normal retirement range, you pay ZERO taxes.

 

[almost there]

"Is the pension adjusted for inflation?"

No a flat 300k at 55.

Tax Bracket 15%

What was 450k last yr. is now 350k.

I look for some better years going forward, how good?
I don't know...... 8-10%?


What kind of growth or % does the 1.25m anticipate?
CD's paying 5% going forward?
Or market returns?


Thanks

 

[jIMOh]

The 1.25 M was 50k divided by 4% (50/.04). Meaning if you have 1.25 M you could withdraw 4% each year and probably have money outlast you.

The 1.25 M is a target with 4% withdraw rate. The 4% withdraw rate is discussed here on many threads and gives a TARGET. It is not a hard rule, it is a guideline or rule of thumb or conventional wisdom if you will... the 4% research used a 60-40 allocation of stocks and bonds.

If you wanted a 3% withdraw rate use 50/.03= $1.7 M.
If you wanted a 5% withdraw rate use 50/.05= $1 M

A 3 % withdraw rate could be done with 100% equities as long as the yield of portfolio is 3%. Then you could live off dividends for rest of your life. And probably never touch principal. This is the approach I am shooting for (currently age 35 and retiring in 18 years). You have about double saved what I have now- so let me know how it goes- I am right behind you

A 5% withdraw rate would probably need a mix of stocks and bonds (maybe a 50-50 portfolio) and more than likely would draw down principal sooner rather than later.

A suggestion would be to make some spreadsheets and run through these scenarios with various rates of return. Firecalc and other online spending/draw down calculators can help with this as well.

I agree you should invest now to get the 8% to 10% rate of return. I assume you are invested in close to 100% equities now? My comment would be in 8 years you would not want to be 100% equites unless you are planning on living off dividends only in retirement (and even then having some bonds might be a good idea- maybe 80-20).

How you allocate when you withdraw will be a function of the percentage of porfolio you withdraw. 5% withdraw rate suggests you probably want lots of bonds and enough equity exposure to outpace inflation. 3% withdraw rate suggests you can handle more volatility (and get higher returns) so more equites could be used (relative to a 5% withdraw rate).

 

[almost there]

Yes, I plan to be 100% in equities for at least the next 3 yrs.
(Would like to recover the 20% dip over the past 12 months)
2/3 rds stays in an aggressive growth balanced fund (although its not very aggressive) and about 1/3 in more aggressive funds. Tech, Global, (this year added Reality) and just lately 10% in Financial services.

Actually, I will need much less than 50k annually to live on.
Its just not easy to imagine not needing the $25,500 to fund the 401 and Roth IRA. Not to mention paying $10k + for State & Fed income tax.

A more realistic number is probably $40k inflation adjusted.

So, things are looking up...... a bit.

Health care is now an issue, and Prop 13 would have to remain in place
for my plan to work.

Thanks again!

 

[almost there]

Well, Its been a rough 2 yrs..........

Still looking to pull the trigger in 6 yrs....... somehow.

350k 410k
85k Roth
325k cash pension in 6 yrs (or $1750 mo. till toes up)
95k cash.
Job=150k yr.
No debt / plan stay in same home forever..... could downsize, but would prefer to stay in same home. Todays value down 20% / 850k

Am 100% out of the market. Earning about zero on everything.
In full survival mode. Went from 100% stock Mutual funds, no all cash earning less than 1%.

Am unable to believe the news. Looks to me like things could get very ugly in the near future. Just not buying the B.S from the Gov. & news media.
Employment numbers, health of the economy, etc.

What to do...........

 

[jayc]

What to do? Do not lose principle. CD's are approx 3% for 4/5 yr. Bond funds and stock market will drop when rates start up. I also think the trend is still down for economy and all markets.

I did notice your numbers increased from the first post. That is good.

How much was from appreciation and how much was from saving/more contribution? If it mostly was from saving then continue and do not lose principle.

 

[almost there]

Agree, but 401's & Roth's dont have CD's as an option.

Added 22k to 401 and 10k to the Roth's yrly for the past 2 yrs.
so 64k was mine & Co match. The little bit xtra was gain in the roth.
(the cash, is just cash earning 1% in a liquid cking act.)
The Pension is 175k now, pays 5.45% plus match on a huge bell curve.
Used to be liniar, and should be 4x as much. But it was changed 1/2 way through my carreer. It will be 325k in 6 yrs.

If the Gov numbers today are strong, I will know its rigged.
And stay out of the markets even longer.

 

[jayc]

Check out Penfed and other credit unions. They have CD for roth/ira. Build CD ladder with highest rates from several credit unions. Pick stable funds in 401K. Maybe look into Fixed Income investing now and start educating yourself if you are going to manage your $$. Maybe 5% in dividend stocks with selling covered options to increase yield.

I am of the opinion you can increase your net worth faster by saving at this stage in life/income than most investments will return. Then do not lose principle. Zero return still beats negative return.

I built a CD ladder with enough return to cover my basic expenses.(mortgage, utilities, food, misc). You have approx 530K wo/pension. That would bring in 15K/year with 3% CD. With your pension that is 36K/year.
Add in another 32K for 6 years and you have another 192K plus the 15K a year from 3% CD. That is another 90K after 6 years. All of this should produce approx 45K/year with almost zero risk. Relax, fluff that pillow good when you sleep at night and let the compounding work for you.

This is a plan with zero risk for losing principle and still meeting your goals. You can increase risk/return with other investments.

 

[almost there]

I am just going to sit all in cash an next to .01% and wait for the crash.
If it doesn't happen?
So what. I have lost nothing.
Unlike the past ten years..........
All this may have been a scam. Not 100% sure........
This "401k V.S pension" My company had for the past 125 years (minus the last 25) (

 

[jwkde]

"If you wanted a 3% withdraw rate use 50/.03= $1.7 M.
If you wanted a 5% withdraw rate use 50/.05= $1 M"

What am I missing? A 3% withdraw rate requires a larger portfolio balance than a 5% rate?

Thanks

 

[almost there]

I dont know?
Seemed odd to me as well.........

 

[jayc]

"If you wanted a 3% withdraw rate use 50/.03= $1.7 M.
If you wanted a 5% withdraw rate use 50/.05= $1 M"

What am I missing? A 3% withdraw rate requires a larger portfolio balance than a 5% rate?

Thanks

These are 2 examples with different SWR and amounts that would generate approx 50K per year you mentioned in your original post.

 

[OrcasIslandBound]

The old "rule of thumb" on withdrawal rates used to be that one could reasonably "safely" withdraw about 4% of the entire portfolio per year without significant risk of running out of money during their lifetime. So, 4% of 1.25 million is about 50K. If you are more aggressive (not recommended) you might attempt 5%, thus requiring a lower nest egg of 1.0 million. However, I happen to believe that you might want a bit more $ in the nest egg and aim for something less than 4%, say 3.5%, in which case you would need about $1.43 million. (1.43 million *.035 = 50K).

On the other note about being totally out of the market, I take a somewhat different viewpoint. A portfolio that is 100% in CDs (or bonds) actually has, historically, greater volatility than a portfolio that has 20% in stocks and the rest in bonds/CDs. My family has amounts of money similar to your situation, but further along in the process. IE we're older (53) and we have 1.3 million total. We would like to be able to support a 4% rule @ 60K year, but hope to only actually need 50K like you. This means that we need 1.5 million to meet the 60K (4%) but we'll try to live off of less, say 50K. We also need 100K for son's future college expenses. We're aiming to retire on my 56th birthday in January, 2014. Our portfolio is 40% stocks and 60% bonds/cash. Much of the bonds are short term (more than half) for now, the rest mid term. I would anticipate our reduction of the 40% stocks down to about 35% stocks when I quit on my birthday.

Yes, I'm concerned about our government, but feel we have no choice but to have some trust and faith, otherwise, I'm working until I die.

 

[almost there]

Personal up-date (its been a year or so)
Both kids have graduated college. (no loans)
Turned 50 last summer, 4 1/2yrs to go, (The goal)
421k - 410k (Not too good maxing out every year for 25 yrs)
115k - Roth (Started (2) up "max" when the house was paid of 10 yrs ago)
214k lump sum pension today. In 4 yrs (340k or $1750 mo. till toes up) at 55

20k cash now

Bought another house, have 280k in it (Down from 500k a few yrs ago)
It brings in $1900 mo will be paid off 7/1/2016.
Have been paying it down like a mad man, owe 80k today.

SS at 62 should be $1750
No debt / plan to stay in same home, paid it off at 40...... could downsize, but would prefer to stay in same home. Today's value down 20% / 850k (2012 update 700k)

Am 80% out of the market at this time. Was up 9% in March ytd. and pulled the plug. Plan to re-enter going forward.
Recently got back in 20%. 2025 funds & SCHX.
Will post back in a year.
Wish me luck...... And yes- some of this is luck.......

Sorry to bring up a Zombie thread.......

 

[jIMOh]

I think you need some detailed planning.

List income per month and year in one table
List expenses per month and per year in another table (make sure to include rental costs)
List investments in another table

A pension (to me) is a yearly income
If the pension is a lump sum, that changes things

Then also consider if money will last, what risks are present, and change the math as needed.

 

[almost there]

I have done some planing, I use this post as a ref point.

Here is what I have based on your list, looking ahead 4 yrs.

"income per month and year in one table" Several ways to go on this...
2016
$1750 pension option. (or 340k cash balance)
$1900 rental (325k market value today) 80k loan, 0 in 4 yrs.
$1350 from 401K & Roth
-----------
$5000 mo / 60k yr.
====================================================
"List expenses per month and per year in another table (make sure to include rental costs)"

Total= 5k mo., 60k yr. would provide a bit of a cushion.
====================================================

"List investments in another table"

If I get 0% over the next 4 yrs Roth and 401k will be about:
$720k (0% is not my plan, but its a safe number)

The rental will be paid off then, Its been remodeled worth about $325k today. Not sure how to factor than into the mix. Plus rents can go up.

My SS is said to be about $1750 at 62, I left that out of the mix.

As mentioned this thread is a good ref. for me.

 

[Midpack]

I think it's great that you've updated the thread periodcially.

I assume you tried out FIRECalc: A different kind of retirement calculator, but I didn't see it mentioned. Assuming I followed your info, if I enter:

• $60K/yr income 2016 COL thereafter
• $720K 401K & Roth's 2016
• $665K Pension Lump Sum & Rental Sale 2016 (entered as lump sum additions)
• $21K/yr Soc Sec 2023
• 40 years (out to age 95)

Looks pretty good...however I used the default 75:25 equity:bond portfolio which I gather you may not be comfortable with. FWIW

Your spending in every year after the first year will be adjusted for inflation, so the spending power is preserved.

FIRECalc looked at the 101 possible 40 year periods in the available data, starting with a portfolio of $720,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 101 cycles. The lowest and highest portfolio balance throughout your retirement was $488,977 to $17,248,043, with an average of $4,764,012. (Note: values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 40 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

 

[jIMOh]

Decision 1- sell rental and increase liquid net worth, or keep for cash flow?

15 years is break even, if you received 0% on investing money for 15 years...

 

[almost there]

Update: today

$448k 401k (in cash at this time)
$126k (2) Roth IRA's
$231k pension (Int was lowered on 1/1/13 from 6% to 4.5%)
$250k equity in rental.

To get 5k to 6k per month in 2016, I could split it up a few ways.

$1500 pension option (or $330k lump cash balance in 2016)
$1500 from rental after prop tax & expenses.
$3000 401k & roth $720k assuming next to no return till 2016 just regular additions

or cash out rental & pension & look for a decent return.
$350 rental
$330 pension
$720 401k & roth
$1.4m total

Just a few ideas & a quick update to this old thread.
Did not include SS, is said to be about $1700 a mo at 62.
Will see.......... If its still there it would really help.

 

[obgyn65]

Thank you for the update. Your numbers look good. I am also 47, afraid to make the jump to ER.

 

[almost there]

I was 47 on the 1st post.
Am 51 now.......
The closer it gets, it seems the more I will need. LOL LOL
Never enough is an easy trap to fall into.
Good luck!

 

[Meadbh]

Thank you for the update. Your numbers look good. I am also 47, afraid to make the jump to ER.

Oh come on, obgyn, you can do it! You're almost there. Now take a big breath and PUSH!!!!!

 

[almost there]

Probably the final $$$ up-date, am being severed after 30 yrs.
(Along with everyone else)
Not that I wont up-date, but the accumulation will slow/stop.
Will get 85% med and a yrs pay -42% tax.
Planned on 55, but here I am at 52.

1st post 6 yrs ago:
$300k 401k, (down from 450k)
$55k Roth IRA,
$90k Lump sum pension (projected to be $300K at 55)

Today
$470k 401k
$121k Roth IRA
$250k Lump sum pension (will leave alone for now as it earns over 4%.
$400k rental / $2000 mo. will pay off the loan with yrs pay from above.
$50k cash / checking

The plan is to live off the rent money & make a few bucks in my hobby.
So, I guess that's semi retired. But do enjoy the hobby. So to me its not really work.
Am sitting in money markets right now. No interest in being invested at this time.
Too much going on at the moment...... Holding off on the 72t, want to see how things go for a while 1st.

That about wraps it up.
Thanks again for all the help / input.