We think we are close...are we?

[Lazyfabs]

been a while since i posted and couldn’t find one of our initial post when we first joined for peer review back in 2012 or so. since we are on our subconscious ‘home stretch’ thought would post our current situation for peer review again.

our plan was always to be FI by at least 55 and RE by 58 (at least me). DW and me are 51. DW works for megacorp and i for local gov’t. 2 daughters 13 and 11.5. we both enjoy our jobs, but given the last year with Covid and 4 politically has made the notion of doing more than ‘work’ has set it bit more and definitely more appealing.

retirement eligibility for me is at 57 w/ some negatives on pension benefits explained below.
DW can stop whenever, but she likes her job and to work.

taxes fed: 33%+/yr; state 6.5%+/yr

income pre-tax:

DW

• salary: ~$250,000/yr
• bonus: ~$50,000/yr (we have never considered her bonus as part of our annual income since it varies and if the does get it we consider it gravy and usually split it up 50% to pay down mortgage, 25% for daughters college fund, and 25% for trip or two. most years it has been in the range noted + or - $5,000, but this past year megacorp forwent giving a cash bonus.
• ESOP and RSU: varies on megacorp performance; as DW bonus we also treat this portion of our overall income as gravy if we are in a position to take advantage of any gains upon liquidating.
• RSU vest 3yrs after granted and we have sold them after they vest and reach LTG status.
• ESOP start vesting in 1/3 increments after 1 yr from grant date w/ expiration at 10 yrs.
• if we had to sell the vested ESOP/RSU on monday we should net approx ~$350,000

Me

• salary: ~$85,000/yr

Tax deferred contributions:

• we both have always maxed out 401k: $19,500 (x2) into Trad-401k; $6,500(x2) catch up into Roth-401k
• 401k match of salary: DW 6% ~$15,000/yr; Me 5% ~$4,250/yr
  
• Me backdoor Roth IRA $7,000/yr

Taxable contributions.

Brokerage:

• $~18,000/yr split in 1/3 - FXAIX (S&P 500)/FTABX (Tax Free Bond)/Cash

Investments:

our allocation across all our accounts has been ~65/35 stock/bonds w/ a ~5% rebalance threshold

Tax deferred (all invested in index funds S&P 500, Total Bond, Total Int’l type)

• DW 401k: ~$685,000
• DW Trad IRA: ~$930,000
• DW Roth IRA: ~$85,500

• Me 401k: ~$605,000
• Me Trad IRA: 0 (us it for Backdoor every year)
• Me Roth IRA: ~$80,500

Taxable:

• Cash: Checking/Savings: ~$100,000
  
• Brokerage: ~$675,000; w/in our brokerage accounts we consider/have set aside ~$300,000 as our Oh! Crap! money which consist of the 2 mutual we invest monthly as noted above in FXAIX/FTABX + any cash. DW did go though a downsize 10+ yrs ago before joining megacorp so we have made sure we have enough to carry us along several years if that were to happen again. There remaining taxable investments are held mostly in index and sector ETF and basket of about 30-35 blue chip individual stocks.

Pensions:

• Me: at 62 pre-tax est ~$18,000/yr or at 57 pre-tax est ~$13,500 (if leave when eligible but before age of 62 there is a 5% hit per year). COLA adjusted.
  
• DW: at 62 pre-tax est ~$30,000/yr if megacorp doesn’t evaporate it before hand.

Social Security:

both of us planning on taking it at least at 67 and beyond depending on numbers when we get there.

• DW est: ~$2,800/yr at 67
• Me est: ~$2,300/yr at 67

Healthcare:

We are on my insurance plan and plan on staying on it after we pull the trigger which we are eligible to be on at current employ rate, which can be at my 57 eligibility day. right now it’s around ~$500/month.

Expenses:

• I have kept pretty consistent expenses since forever and had approx 20+ yrs worth until quicken quasi folded which we lost and have been since using personal capital, mint. have a really good idea of monthly expenses our expenses have run around ~$150,000/yr, which includes everything under the sun (mortgage, utilities, food, travel, insurance, taxable savings, college savings, etc).
  
• we are in the process of finishing up a whole house remodel and ‘foreverish’ home for now, which will keep our expenses at around that level prob for another 10 yrs or so. once the dust settles it will be worth in the neighborhood of ~$2 million (based on bank appraisals) w/ about ~$1 million in equity. we have used some ESOP grants for the remodel this past year. as noted above, we have in the past used bonus and ESOP/RSU $’s to pay down our mortgage and we pretty much paid off more than1/2 of our last house in about 7 yrs which we sold for ~$1 million before purchasing the new house under remodel and plan on doing so once our builder gives us the keys and we can move in.
  
• our home is our only debt and have not carried a CC balance or had a car payment in 25+ yrs
  
• as noted above given our yearly avg expenses of ~$150,000 we have ~2.5 yrs to cover expenses w/o taking into account my salary.

Education:

• have ~$60,000/daughter in 529 and UTMA accounts and contribute monthly and yearly if grandparents gift some extra $, bonus is available, etc.
• once both girls get to college age our plan is to offset any expenses outside 529, UTMA, w/ ESOP/RSU if possible and potentially grandparent scholarships which have been discussed, but we are not planning on grandparent assistance as part of our overall plan until any $ is handed out.

thanks to all for any insights, suggestions, etc.

[Out-to-Lunch]

Quote:

Originally Posted by Lazyfabs I have kept pretty consistent expenses since forever and had approx 20+ yrs worth until quicken quasi folded which we lost and have been since using personal capital, mint. have a really good idea of monthly expenses our expenses have run around ~$150,000/yr, which includes everything under the sun (mortgage, utilities, food, travel, insurance, taxable savings, college savings, etc).

Well, IMHO what is really important is what your anticipated expenses will be AFTER you retire. For example, your $150k, if it is "everything under the sun," should include your payroll FICA/Medicare taxes. What will your expenses be if you deduct them? What will your actual expenses be in retirement?

You listed your SS as annual amounts. Did you mean monthly?

[DawgMan]

At quick glance, I think you will be fine, especially if you are looking at hanging it up around 57. You have good income, current savings, and you appear to be very organized with your finances. As stated by Out-to-Lunch, understanding your panned retirement expenses/spend is the critical piece. I have 4 kids (3 girls) and while my FI goal was also 55, it also matched up with when the last kid graduated college. I wanted to be done with the heavy lifting. There were plenty of financial surprises during the kid raising gauntlet of teenage to college years. I would ride your wife's good salary through these years or at least until your girls go off to college so the financial picture is a little clearer. None the less, you are tracking just fine... congrats on that!

[pjigar]

Looks like you are ready. 3% of invested plus pension add up to expense at first glance. Be sure to run the numbers in FireCalc. Have you thought about cashflow before and after pension/SS starts? Looks like large chunk of you money is in retirement account so plan on how you will get money out for expenses while minimizing taxes/penalties and maximizing healthcare subsidies if any.

[Lazyfabs]

Quote:

Originally Posted by Out-to-Lunch Well, IMHO what is really important is what your anticipated expenses will be AFTER you retire. For example, your $150k, if it is "everything under the sun," should include your payroll FICA/Medicare taxes. What will your expenses be if you deduct them? What will your actual expenses be in retirement? You listed your SS as annual amounts. Did you mean monthly?

we have started to think about expenses after retirement and for sure our tax situation. over the last ~5 years our taxes overall have varied on the high side and sometimes seemed mind boggling when we have exercised ESOP and/or RSU, but first world problems since we have been very fortunate w/ the outcome of these options.

regardless of much time is left for ESOP need to expire we have exercised them when the black schoul's model calculation hit the 95%+ range and used the proceeds for mostly paying down mortgage, but also to diversify or portfolio.

being that our daughters will be in midst of their college age sure that will for sure be a factor in our expenses. our housing expenses on avg sure will be around the same, i.e. mortgage, utilities, food, etc. at least thru those college years.

it's amazing how much more the grocery bill is w/ 2 kids zoom schooling from home and growing like weeds eat...

one thing i forgot to add is that currently our daughters are in private school, which is part of our currently budget calculation. given how much we pay now it is for sure preparing us for when they go to college.

yes my SS amount should have been labeled monthly, i'll try and edit.

thanks for reply

[HarveyS]

Your numbers seem well documented and demonstrate you are in good shape to retire at 57. Do you earn too much to contribute to a Roth?

[Lazyfabs]

Quote:

Originally Posted by pjigar Looks like you are ready. 3% of invested plus pension add up to expense at first glance. Be sure to run the numbers in FireCalc. Have you thought about cashflow before and after pension/SS starts? Looks like large chunk of you money is in retirement account so plan on how you will get money out for expenses while minimizing taxes/penalties and maximizing healthcare subsidies if any.

been a while since we rand FireCalc and over coffee this am decided to give it a whirl again. hopefully i inputed the informations as needed to come up w/ the results.

timeline used 7 yrs pre-retirement and 38 post retirement starting in 2028, which puts me at 58 + 38 yrs of retirement and pushing daisies at 96. we both have history of 95+ longevity in our families. since couldnt find a place for spouses timeline not sure where to input that info.

used current portfolio value minus ESOP/RSU value = ~$3,000,000 (includes pre-tax/taxable)

allocation constant at 50 stock/50 bond to be conservative. our portfolio has run in the 65 stock/35 bond range. we tend to be bit more conservative when fwd looking just in case.

additions to our portfolio used numbers we are doing now into tax deferred accounts only + company match = ~$80,000/yr

SS used annual est starting at 67

Pensions just used my numbers w/ the lesser amount of $13,500 w/ the deductions as i mentioned above if I decided to take it before age of 60.

using both constant spending and the Bernicke's Reality Retirement Plan both show 100% success rate.

on other sites personal capital has us at a success rate of 84%, but w/ a projected monthly retirement spending ability @ $14,583/month with planned retirement spending ability @ $12,500/month ($150,000 per year which is our currently avg spending). it does include balances of all investment accounts not tagged towards education and this number is w/o DW pension.

fidelity using the below avg market simulation has us at a score of 97 w/o DW pension and 102 w/ DW pension.

[Lazyfabs]

Quote:

Originally Posted by HarveyS Your numbers seem well documented and demonstrate you are in good shape to retire at 57. Do you earn too much to contribute to a Roth?

yes for DW and we have looked into doing mega backdoor roth for her in the past, but when investigated the pr0-rata rules numbers didn't make sense.

i have been doing back door roth for several years now at the maximum contribution amount allowed.