hi all- how am I doing?

[floatingdoc]

I just found this forum searching around the net for retirement info. I am married, 43, no kids. I am trying to figure out if I am on track to retire in 7 years at age 50. I am a daily market/portfolio watcher but I do not react violently to market ups and downs. I am about 55/45 stock bond allocation at present. Here are the numbers:

Self employed. I own my office building (worth 125K) outright. I own my condominium outright (450K), no significant debt, 870k in savings (770k savings vanguard, 100k in retirement plans). I am planning on saving 50-60k per year in the next 7 years. I anticipate moving to a more conservative allocation in the next several months. I dont want to experience what many did who were 1 or two years out from retirement with the 2008 market crash. I am fully invested in a vanguard 2030 fund and the rest in short term investment grade vanguard fund.

I am worried about missing any upswing in the market if I move to conservatively. I guess this is a near daily question on the forum. I want to have enough to retire with 70 k annually in retirement income.

 

[Coach]

Hi floatingdoc, and welcome to the forum.

As a rule of thumb, at a 4% withdrawal rate, you will need to accumulate $1.75M to draw $70K annually.

A better alternative would be to spend some time with FIRECalc, a very nice retirement calculator. There's a link at the bottom of each page. It's great at helping you think about what you need to do to reach your retirement goal.

Best of luck with your planning, and again, welcome aboard.

Coach

 

[walkinwood]

Welcome to the board! I second Coach's advice.

There's nothing wrong with being a daily market/portfolio watcher, but reacting to market ups and downs - whether violently or not, is not good for your portfolio value.

There are some great books to read on the subject of retiring early and investing. Look for a thread by Nords that has a great list of books. This forum has great advice, but your ability to stick to it, imho, depends on how fully you understand and believe in it. Reading will help you get to that point.

If you haven't started already, this is a good time to start tracking all your expenses so you have a good picture of which expenses are important to your happiness, which will rise after you quit working, and which ones will fall. This exercise helped us immensely.

Good luck!

 

[Milton]

If we take your office building (125K) and current savings (870k), and assume (say) a 2% annual return after taxes and inflation, you should have investments of about $1.14M (2009 dollars) in seven years' time. And if you contribute ~385K in additional savings over that same period, that should bring you up to about $1.53M.

That is 220K short of the $1.75M Coach suggests as a rule of thumb ... but perhaps you can sell your condo and either rent or downsize to a smaller (cheaper) place. Or perhaps you can manage to stash away more than 50-60K annually?

If you haven't started already, this is a good time to start tracking all your expenses so you have a good picture of which expenses are important to your happiness, which will rise after you quit working, and which ones will fall.

Very good advice. You may find that you actually need significantly less than $70,000 annually, in which case you might be able to retire sooner than you think. Conversely, you may find that $70,000 annually is not going to be enough, in which case you will need to either adjust your lifestyle or postpone retirement for a few years more.

In any event, it is better to arrive at a reasonably reliable annual amount based upon current expenses rather than simply pulling a number out of the air.