I was inspired by MDJO sharing his household expense in another thread.
We're looking to retire at age 55. There's a 4 year age gap between us:
One of us will be 43 next week and works in traditional employment earning ~$130K/year (with health benefits, employer-paid life/short term/long term disability with employer) and the other will be 39 next week and is self-employed with variable earnings ~$70K-$100+K/year while also serving as primary caretaker for our toddler son. Our family's health insurance is through the employer's insurance plan.
I tallied up this year's estimated expenses - we're in the last week of December - what is below is pretty representative of the yearly "financial outflow" in the household.
I realize that pre-retirement and post-retirement household budgets will change. But sharing this pre-retirement budget is to give you an idea of our general household expenses, then we can start making assumptions about what post-retirement expenses to consider.
Here goes:
BASIC HOUSEHOLD EXPENSES - ANNUAL ~$35,000
[unlikely to fluctuate in the next 5 years]
$3,724.39 Running the Car
Expenses include: DMV Registration, Gas, Repair/Service
$8,965.38 Feeding the Family
Expenses include: Grocery incl. Costco, Restaurant
$2,275.00 Giving to Causes We Believe in
Expenses include: 501c3 charitable orgs
$4,385.45 Insuring the Family's Health/Future
Expenses include: estimated Term Life insurance premiums, fire insurance for home, auto insurance, non-covered healthcare Copay, Meds, Dental/vision [medical insurance covered by employer so that $ is not added in this total]
$3,039.78 Running the House
Expenses include: Cell phone, Electricity, Natural Gas, Internet, Telephone, Water
$10,717.65 Maintaining the House
Expenses include: Gardening, Home maintenance/repair, Target Store purchases, and $9,016.04 in Property Tax
Clothing the Child
$299.06 Kids Clothing
~$1500 cash for misc. expenses and cash-purchases.
CONDITIONAL ANNUAL EXPENSES - COLLEGE, PARENTS
[likely to fluctuate from year to year] ~$12,800.
College Fund for Child
$5,000.00 contribution/year
3year old's 529 is currently at $46K
Helping out Parents
$7,800.00 Parents Living Expenses
Additional info:
$70,000-$100,000 is our target annual savings to put into investments. But again, given the self employment status, plus the variable tax rate because of this, this number fluctuates year to year.Ideally, we want to support all general & conditional household expenses using the self-employment income, and save all of the traditional employment income into retirement & taxable investments/savings. We used this approach to pay off our house in 5 years, so we want to continue using this approach to fund our retirement.
Here's My Question: Is estimating $90,000 target annual income from retirement too high?
We would need to have about $4.7M in retirement funds by age 55 to draw this amount based on the Kiplinger retirement calculator. Assumptions include NO social security or pensions (these would help but we don't want to have to count on them), a 6% ROI, 35% stock allocation during retirement (we may drop this lower to 20 or 25%), with lifespan of 92.
I can knock this number down by $1M if I factor in our home equity (since it's all paid for), to make it $3.7M not $4.7M.
I know that by age 55, we'd be paying for our health insurance - there'd be a "gap" between when social security and medicare would kick in.
To err on the side of caution and to factor inflation, I used a really high # like $90,000 - which in 15 years may be around $60K in today's purchasing power.
I want to have enough where we don't have to touch the principal, but we can live comfortably off the dividends. We also are considering a family trust that would take care of future generation's education & higher educational expenses, which is why we would prefer not to "empty" out our retirement savings/taxable investments upon death, if at all possible.
We're looking to retire at age 55. There's a 4 year age gap between us:
One of us will be 43 next week and works in traditional employment earning ~$130K/year (with health benefits, employer-paid life/short term/long term disability with employer) and the other will be 39 next week and is self-employed with variable earnings ~$70K-$100+K/year while also serving as primary caretaker for our toddler son. Our family's health insurance is through the employer's insurance plan.
I tallied up this year's estimated expenses - we're in the last week of December - what is below is pretty representative of the yearly "financial outflow" in the household.
I realize that pre-retirement and post-retirement household budgets will change. But sharing this pre-retirement budget is to give you an idea of our general household expenses, then we can start making assumptions about what post-retirement expenses to consider.
Here goes:
BASIC HOUSEHOLD EXPENSES - ANNUAL ~$35,000
[unlikely to fluctuate in the next 5 years]
$3,724.39 Running the Car
Expenses include: DMV Registration, Gas, Repair/Service
$8,965.38 Feeding the Family
Expenses include: Grocery incl. Costco, Restaurant
$2,275.00 Giving to Causes We Believe in
Expenses include: 501c3 charitable orgs
$4,385.45 Insuring the Family's Health/Future
Expenses include: estimated Term Life insurance premiums, fire insurance for home, auto insurance, non-covered healthcare Copay, Meds, Dental/vision [medical insurance covered by employer so that $ is not added in this total]
$3,039.78 Running the House
Expenses include: Cell phone, Electricity, Natural Gas, Internet, Telephone, Water
$10,717.65 Maintaining the House
Expenses include: Gardening, Home maintenance/repair, Target Store purchases, and $9,016.04 in Property Tax
Clothing the Child
$299.06 Kids Clothing
~$1500 cash for misc. expenses and cash-purchases.
CONDITIONAL ANNUAL EXPENSES - COLLEGE, PARENTS
[likely to fluctuate from year to year] ~$12,800.
College Fund for Child
$5,000.00 contribution/year
3year old's 529 is currently at $46K
Helping out Parents
$7,800.00 Parents Living Expenses
Additional info:
- $550,000 Current combined retirement savings (401K, SEP-IRA, Roth, taxable investments)
- No debt including mortgage
- $46,000 in son's 529
$70,000-$100,000 is our target annual savings to put into investments. But again, given the self employment status, plus the variable tax rate because of this, this number fluctuates year to year.Ideally, we want to support all general & conditional household expenses using the self-employment income, and save all of the traditional employment income into retirement & taxable investments/savings. We used this approach to pay off our house in 5 years, so we want to continue using this approach to fund our retirement.
Here's My Question: Is estimating $90,000 target annual income from retirement too high?
We would need to have about $4.7M in retirement funds by age 55 to draw this amount based on the Kiplinger retirement calculator. Assumptions include NO social security or pensions (these would help but we don't want to have to count on them), a 6% ROI, 35% stock allocation during retirement (we may drop this lower to 20 or 25%), with lifespan of 92.
I can knock this number down by $1M if I factor in our home equity (since it's all paid for), to make it $3.7M not $4.7M.
I know that by age 55, we'd be paying for our health insurance - there'd be a "gap" between when social security and medicare would kick in.
To err on the side of caution and to factor inflation, I used a really high # like $90,000 - which in 15 years may be around $60K in today's purchasing power.
I want to have enough where we don't have to touch the principal, but we can live comfortably off the dividends. We also are considering a family trust that would take care of future generation's education & higher educational expenses, which is why we would prefer not to "empty" out our retirement savings/taxable investments upon death, if at all possible.
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