On track for 55?

[Tgancarz]

Hi all, great forum

Me: 40
Spouse: 44


Total saved for retirement: 350k allocated at 80/15/5 mutual funds/bonds/individual stocks


We are planning for me first at 55, then spouse at 59. I begin collecting small pension at 55 (20k/yr). We contribute 30k/yr (20k in 401k & 10k in Roths)


At 65 spouse collects SS at 18k/yr, then me 4 yrs later at 20k/yr (conservative estimates and not even sure if it will be there in 15 yrs....lol)


Looking for advice...are we on track?

 

[jclarksnakes]

Welcome to the forum. Whether you are on track depends upon how much you plan to spend in retirement. What are you going to do for health insurance from age 55 to 65 when medicare starts? It is also important to know whether your pension will be covered by cost of living allowances. What you have saved now and the rate you plan to save till you reach 55 looks pretty good.

 

[Tgancarz]

Thank-you - Great question on the pension. I will find out.

We are looking at needing $90k yr after taxes (todays dollars). I will have 30 yrs at 55 so I can opt for retirement and take along my employers health plan and they still contribute to the cost of that.

I am one of those retirement calculator junkies and have been plotting all of my info in various versions throughout the net. Curious if anyone has a good one that will calculate all streams of income after retirement.

 

[donheff]

We are looking at needing $90k yr after taxes (todays dollars). I will have 30 yrs at 55 so I can opt for retirement and take along my employers health plan and they still contribute to the cost of that.

Your biggest challenge will be to constrain your lifestyle and continue the savings. A lot will depend on earnings rates and inflation. Keep tracking and dump your raises into savings (if you can).

 

[Midpack]

I guessed at some of your assumptions, but based on what I think I read, here's what FIRECalc: A different kind of retirement calculator spit out.

Many people would be OK with that probability (and a lot can happen, good or bad in the next 15 years), but many others are looking for more than 100% probability of success. Spending 90K/yr seems pretty lavish given the other inputs...

 

[jclarksnakes]

Firecalc is IMO the best of the retirement calculators. That 87% probability of success that it produced for Midpack using assumed numbers for you would be enough to make me either figure out a way to save more now or plan to spend less in retirement. Try running Firecalc numerous times using different scenarios and see what you get. The "good news" is that you are on the way to an early retirement. The big question is how early that can be. Maybe if things work out well you can retire sooner than age 55. Maybe not and you have to work some after 55. Either way you are going to be better prepared for retirement than most people. Firecalcs estimate is looking at a very long time period. A decade from now when you are getting closer to making the decision it and possibly other tools can give you a more accurate estimate because they will have fewer years to consider.

 

[EvrClrx311]

Hope some of this math helps:

Edit: (fixed to account for pension/SS)

assuming inflation of 3% a year average, you'll need $140,217 to live on each year in 15 years ($140,217 in 2027 will buy you what $90,000 does today)... lets assume approximately half of that will be taken care of from pension and SS (I would assume in 15 years your pension is approx $30K from COLA, and SS would make up the other $40K). The math is not this easy to account for what happens between ER and when SS comes... but gives a general idea of how on track you are.

So using the 4% rule, that means your nest egg would need to be $1,750,000 to produce the rest (about $70,000 a year)

Looking at getting your $350,000 to grow to $1.75M you need some combination of the following to happen (how much you save, vs how much it grows)

A) Starting with 350K if you saved $30,000 a year for 15 years, you would need your account to grow 8% a year to get to 1.75 million (8% a year is a somewhat optimistic assumption over 15 years)

B) Starting with 350K if you saved $40,000 a year for 15 years, you would need your account to grow 6.75% a year to get to 1.75 million (6.75% a year is a pretty safe assumption over 15 years, but historically with your allocation is is "average" or has a 50-50 shot)

C) Starting with 350K if you saved $50,000 a year for 15 years, you would need your account to grow 5.5% a year to get to 1.75 million (5.5% a year is a very safe assumption over 15 years)

Very attainable at your current distribution... although you want to be careful about your AA the closer you get.

 

[jclarksnakes]

EvrClr,...Your math is fine but seems to ignore SS and the OP's pension. If the pension is COLA'd it along with SS will provide a substantial part of what the OP needs in retirement. If the OP was just to look at your numbers they might understandably just throw their hands up in the air and exclaim;"I will have to eat cat food in my old age".

 

[mh]

Hi all, great forum

Me: 40
Spouse: 44

Total saved for retirement: 350k allocated at 80/15/5 mutual funds/bonds/individual stocks

We are planning for me first at 55, then spouse at 59. I begin collecting small pension at 55 (20k/yr). We contribute 30k/yr (20k in 401k & 10k in Roths)

At 65 spouse collects SS at 18k/yr, then me 4 yrs later at 20k/yr (conservative estimates and not even sure if it will be there in 15 yrs....lol)

Looking for advice...are we on track?

If I were you I would probably be maxing out my 401k's.

 

[EvrClrx311]

EvrClr,...Your math is fine but seems to ignore SS and the OP's pension. If the pension is COLA'd it along with SS will provide a substantial part of what the OP needs in retirement. If the OP was just to look at your numbers they might understandably just throw their hands up in the air and exclaim;"I will have to eat cat food in my old age".

... all that work for naught

Just cut all the numbers in half...

(kidding, I'll go back and edit)

 

[pb4uski]

Actually 1/2 is probably about right since SS and the pension is about 1/2 of their desired spending level. Hard to tell since we don't know if the pension is COLA'd or not.

My sense is that the OP is in pretty good shape if they stay the course, but if I were them I would scrutinize the 90k of spending as it is lavish compared to what many of us actually live well on.

 

[EvrClrx311]

My sense is that the OP is in pretty good shape if they stay the course, but if I were them I would scrutinize the 90k of spending as it is lavish compared to what many of us actually live well on.

yep they look to be well on their way...

 

[YoungSaver]

As a young saver, I'm curious as to what the 90k budget consists of. To me that is an unbelievable amount of money to spend each year. I know cost of living is lower in the midwest, but not by that much.

 

[EvrClrx311]

As a young saver, I'm curious as to what the 90k budget consists of. To me that is an unbelievable amount of money to spend each year. I know cost of living is lower in the midwest, but not by that much.

Cost of living I'm sure has a lot to do with it. In some areas...

Food for two could be ($15 a day each) $900 a month, or $11,000 a year
Mortgage/Rent is about $2,500 a month ($30,000 a year) for a modest 2500 sq ft townhouse
Fuel is about $500 a month ($6,000 a year)
Utilities/bills are about $500 a month ($6,000 a year)
Property Taxes are about $500 a month ($6,000 a year)

All of that adds up to about $60,000 a year already... without the mortgage you're still looking at $30,000 a year before spending anything on 'fun stuff'. The other $1-2K a month could be for vacationing, travel, hobbies, gifts, charity, entertainment.

Also, don't forget you'll lose about $13,000-18,000 a year to taxes as you withdrawal assuming IRA instead of Roth (if that's not already accounted for in the 90K a year number)

 

[YoungSaver]

So going by your numbers, cost of living is the #1 issue and living in high means is #2.

 

[Tgancarz]

Great insight everyone and I truly appreciate you taking the time to look at my plan.

I tried to be brief on my initial post so as not to bore, but some of the things I left out are this:

House will be paid and we won't be contributing to 401k's, so that $90k need will be more like $60k. Additionally, I plan to work a PT job from 55-65 if necessary.

When I am planning, I always try to go to worst case scenario.....ie....worst case is that we'll need 100% of preretirement income and always use 4-5% as growth rate in investments.

In any case, I think we can do better on the 401k's and max out both and I'll be running some more numbers through Firecalc - never used that before.

By the way there is a COLA on the pension, but not sure how much.

Thanks everyone!!

 

[EvrClrx311]

So going by your numbers, cost of living is the #1 issue and living in high means is #2.

I would say those are hard to put in order... because it depends. Some let location drive how much they spend, while others let how much they can spend drive where they live.

Sometimes you don't have much of a choice... like if you happen to love or are attached to an area; or if your kids move somewhere and you want to spend retirement near them and the grandchildren.

Its a good idea to think about those things as you near retirement and plan accordingly. Someone planning to move to Florida for retirement should probably have a sense of how much more or less it'll cost to be there vs. where they are now.

 

[YoungSaver]

Alright, $60k seems much more reasonable for two people.

So 15 more years of working and saving. Make them count! And have fun

 

[EvrClrx311]

House will be paid and we won't be contributing to 401k's, so that $90k need will be more like $60k. Additionally, I plan to work a PT job from 55-65 if necessary.

By the way there is a COLA on the pension, but not sure how much.

All great news to hear! You're definitely well on your way to FIRE by 55

increasing the retirement savings slightly now might even allow you to do it a few years earlier (or worst case, allow you to avoid waiting longer if the market doesn't behave the way you want/anticipate).

Good luck!

 

[pb4uski]

So once your pension and SS are kicked in your will be receiving 58k (in current $) compared to spending of ~60K (also in current $). So your withdrawal rate will be minimal once your income streams kick in and investments just need to provide for the $2k difference plus your needs from when you retire until the pension or SS kick in.

You need to slog through the details but it sounds like you are on a good path, especially since you will have employer subsidized health care by waiting to 55.

You may want to delay SS to 70 if you have longevity in your family but that is simply a refinement when you get close to SS.

 

[Tgancarz]

Greetings everyone,

I received some great feedback from my original post so I thought I would reach out again. Have managed to increase retirement nest egg to $450k since my first post with a combination of consistent saving and the bull market. However, I am now faced with a potential career ending situation with megacorp. After having spent 15 years with this company with excellent performance ratings & numerous accolades from Sr Management I find myself with a new manager. He has difficulty communicating and a short fuse to boot. Says one thing, does another and when you can't read his mind it is turned against you....others have the same issue but have not had the nerve to discuss it with him yet. Primarily because megacorp frowns upon speaking up (they say they encourage it) and promptly will stamp out any suggestions. Issue came to a head recently and let's just say it didn't end good. I tried to sit down and discuss what took place the day prior and in the end he assured me he was right and I was wrong. So I left it at that. Couple this with another reorg (4th time in 5 yrs) and the situation is mentally unbearable. Megacorp has had a 7+ year track record of promoting incompetent mid level mgmt primarily because they were willing to relocate so this won't end anytime soon. Enough of my rant....

If I leave megacorp I will go from earning 90k to 60k in a less stressful and less demanding job...not looking to escape corporate nonsense, it is everywhere but if I move from management to an individual contributor stress will decrease significantly. Myself and DW are planning to escape the nonsense sometime before 55, then work PT if necessary.

If I run my numbers through firecalc with leaving megacorp today scenario and retire 2024 it says 100% success using 60k yr spend, 19k/yr savings, reduced 7k non inflation adjusted pension at 55 and the SS numbers I gave on first post. If I stay with megacorp we can save 30k/yr and pension is 18k at 55....when I run this scenario it provides 100% success using 2023 as retirement.......so I ask the following questions:

1. Can someone check my numbers in firecalc? It doesn't make sense to me that I could scale back to a less stressful job and only give up 1 year of early retirement.
2. If my numbers are correct, I am leaning towards 'pursuing other opportunities' - I am an extremely hard working and loyal employee and as a consequence I feel married to megacorp and I am having difficulty with this. Thoughts?

 

[Milton]

Sorry to hear about your employment situation. It's very difficult to work for an angry person who expects you to read their mind!

I can empathize, having once worked for a partner with similar issues. He was a controlling person and insisted everything be done his way. That was okay because he was a very gifted lawyer, but he was so busy that when anyone asked for direction he would blow up and accuse the employee concerned of lacking initiative. The end result was paralysis, as no one wanted to risk his temper (either for doing the 'wrong' thing or for seeking instructions). There was very substantial turnover, with the better employees going on to 'greener pastures' and the worse ones being fired.

If my numbers are correct, I am leaning towards 'pursuing other opportunities' - I am an extremely hard working and loyal employee and as a consequence I feel married to megacorp and I am having difficulty with this. Thoughts?

You are unlikely to win this personality conflict, and it seems clear to me that you are going to be out of a job pretty soon. I'd suggest reading the writing on the wall and seeking alternative employment now, while you still have time; it's generally much easier to find work while you are currently employed.

As far as loyalty to megacorp goes, here are my thoughts:

(1) Corporate loyalty to employees has not existed over the past two or three decades. All those favourable past performances ratings are yesterday's news: what have you done for them lately? As soon as the new manager-from-hell has given you one or two bad reviews, you'll be thrown under the bus, pronto;

(2) By your own admission, the company discourages open discussion; promotes incompetent managers; conducts endless re-orgs; and generally fosters a "mentally unbearable" work environment. Why would you want to remain in an 'abusive marriage'?

 

[growing_older]

Sadly, I have lived through similar scenarios more than once. If there is a way to fly under his radar and outlast him, that can preserve megacorp benefits and salary at the expense of job enjoyment and some quality of life. If you have a senior senior ally you may get some protection, but don't count of it. Dysfunctional usually doesn't adjust to meet your needs, even with support. This can also backfire with a scathingly undeserved review and a forced exit without notice.

Your best bet is to be prepared for the possibility of "house cleaning" and start a quiet (very very quiet) job search now. You might be pleasantly surprised by finding a comparable position. Or at least you will have started the process if you are suddenly without work.

Pile up cash and start cutting expenses. These situations rarely end well, so you'd best be prepared to take care of yourself.

 

[daylatedollarshort]

Have you read Your Money or Your Life? It might help in your decision. If you can't keep the higher salary job because of the stress, the other option is to figure out how to have a high quality life without spending a lot of money and you can still retire early.

This a great article on the subject -

Financial Wealth - It's Time Not Money

The two ways to build wealth are to earn more or spend less, or doing both of course.

Earning more is always good, yet actually has a far lower impact than spending less. And it does because earning more means giving some away in taxes, combined with the fact that you hopefully won't work forever. On the other hand, spending less has a much greater impact as the government doesn't tax savings and we can still spend less in retirement."

Financial Wealth - It's Time not Money - CBS News

 

[MBAustin]

Sadly, I have lived through similar scenarios more than once. If there is a way to fly under his radar and outlast him, that can preserve megacorp benefits and salary at the expense of job enjoyment and some quality of life. If you have a senior senior ally you may get some protection, but don't count of it. Dysfunctional usually doesn't adjust to meet your needs, even with support. This can also backfire with a scathingly undeserved review and a forced exit without notice.

Your best bet is to be prepared for the possibility of "house cleaning" and start a quiet (very very quiet) job search now. You might be pleasantly surprised by finding a comparable position. Or at least you will have started the process if you are suddenly without work.

Pile up cash and start cutting expenses. These situations rarely end well, so you'd best be prepared to take care of yourself.

Good advice. If you have built up some positive capital with other members of management over the years, this is the time to cash it in - ask for advice, ask how your manager is perceived by his peers, ask for a job! Definitely time to start the low-key external job search as well - if you haven't done a resume lately, the preferred style has changed significantly so get some advice on that.

Good luck and hang in there!