42 going on 65

[raptorctr]

my friends joke that i'm an "old man" already. Been focused on retiring as soon as we can, hopefully within 10 years.

We currently have a FA, but as i become more financially aware, starting to consider taking more involvement and maybe doing something with Vanguard.

I'm just not sure how to plan for a couple of things.

1. How do i fund retirement before we can access our retirement accounts. Not sure how to manage this. Thus see my question 2.
2. Has anybody used Vanguard financial advisor, what level of help did they provide. Really low cost, but i realize people here generally don't support paying advisers.
3. Some good retirement books i should be reading?
4. How do you know how much income you'll need in retirement. We'll be going from 3 homes, down to 1. A lot of our current expenses will go away. Was thinking $75-100k would provide a comfortable retirement. We don't live a very lavish lifestyle now, excluding owning 3 homes. Thoughts?

Thanks

 

[gauss]

What worked for me was tracking all of my expenses (and income) in quicken over multiple years-- 15 in my case.

When ER started to present itself as an option, having that data available and being able to see what expenses would change was priceless.

That data was based on 15 years of freely spending what we wanted to, but with a frugal/value oriented mindset that was "in our DNA."

Once I saw that I could meet my inflaiton-adjusted expenses in retirement with a good degree of robustness, I knew that I had made it.

-gauss

 

[Quantum Sufficit]

The "how much do I need question" definitely comes down to how much do you need to spend annually. Expense tracking is critical to knowing when you are financially independent. Welcome aboard and good luck to you.


Doc

 

[arky]

What worked for me was tracking all of my expenses (and income) in quicken over multiple years-- 15 in my case.
......
-gauss

+1

Five years in my case. It provides invaluable information.

 

[Pilot2013]

Raptor- I have received this same advice (within minutes of posting on here ) and have started looking in to ways to determine past spending since I didn't use quicken, etc for all of my spending.

I created a spreadsheet and tried to put spending together from memory.... that damn list kept growing, rapidly!

I then just took my current take home, DW's take home, took out our retirement savings, took out a vehicle payment that will be gone in 2 years. I took that number, tried to determine additional withdrawal to pay taxes, and Healthcare cost....

I'm now thinking I will buy quicken, and track for the next 3 years and revisit...

 

[Travelwanted]

Read Bogleheads Guide to Investing

You can do your own investing and save $$$$, getting to retirement earlier!

 

[Finder]

As others have mentioned tracking your expenses for some time is extremely helpful. Going back in time can be tricky, but a lot of banks I believe offer online access to past statements. Depending on how complicated or not your financial situation is you could gather your expenses from your bank statements at a high level. It may be as simple as noting how much in withdrawals you had each month and adding those 12 numbers to give you last year's total. The more years you can do that for the better and add items that only occur every few years (car purchases/roof/renovations/etc), expected increases in healthcare premiums, kid's college, change in travel/vacation plans plus other items that may change while retired.

 

[valueplayer]

Try mint, it's free and pretty awesome imo

 

[rodi]

Another note for using mint or quicken to build the data on your spending. Using your gross income is a good fast dirty method but you skipped a couple of adjustments. Do you get health insurance through your employer? It will likely be different in retirement. Currently you pay SS and Medicare taxes... Those go away in retirement. As do 401k contributions.

 

[Katiek]

As for the Vanguard advisers, there have been a number of threads discussing their services. Most people seem to think they're good at recommending a portfolio of index funds which can be useful to people just starting investing, but you can come up with similar ideas from some pretty easy research.

Second (third/fourth etc) the suggestion of carefully tracking expenses for a few years, very valuable information to have when planning.

 

[gauss]

Don't forget to include your credit card accounts in your tracking so you can categorize all your spending that goes through your credit cards. You want to know what categories (groceries, lunches out, gasoline, etc. etc.) your money is going to now so that you can adjust when you retire.

Be sure to also breakdown your paycheck into categories. (salary, fed tax w/h, FICA, HSA, 401k,......) for tracking purposes.

-gauss

 

[MikeP]

What worked for me was tracking all of my expenses (and income) in quicken over multiple years-- 15 in my case.

When ER started to present itself as an option, having that data available and being able to see what expenses would change was priceless.

That data was based on 15 years of freely spending what we wanted to, but with a frugal/value oriented mindset that was "in our DNA."

Once I saw that I could meet my inflaiton-adjusted expenses in retirement with a good degree of robustness, I knew that I had made it.

-gauss

Nicely put Gauss... and great planning from your end as well! to really know what you have been spending over such a long period of time can only be a benefit and really indicate the sort of expendetures that you could cut down on.

 

[NgineER]

Welcome to the forum

+1 on tracking expenses, since you have 10 years to go, I wouldn't put effort into tracking the past. Just start tracking now.

As far as questions 1&2...
2. I have used vanguard FAs, they focused more on AA than advice on how to access money for early retirement. But I guess I didn't ask that question either, since it was so far out for me.

1. There are a number of ways to fund the early retirement. If you are 55, most companies will let you access the 401k money without penalty. If you have a traditional IRA, you can do a 72t (search the forum). All contributions to a Roth IRA can be withdrawn without penalty after 5 years (a rollover counts as a contribution).
There is a strategy where you roll over your estimated needs from a tIRA every year and after five years, that money can be accessed tax free.

Search the forums for the answers, the question has been asked many times.

 

[NgineER]

And I forgot after tax money as the easiest way to fund the early retirement years.

 

[Pilot2013]

I have heard several talk about 401K plans allowing penalty free withdrawal prior to 591/2. I thought that was a Tax rule/law thing (penalty for withdrawal before 591/2) and not a company decision? I was thinking the 72t rule had to be used, or at least could be used, for 401k withdrawals?

 

[Pilot2013]

Oops, just saw on a 72t site the "55 rule for withdrawal from an employee plan AFTER termination of employment". Got it.

 

[raptorctr]

Thanks guys, this has been helpful. I was reading MrMoneyMustache last night and he recommended Personal Capital (over Mint which i've tried to use in the past). I signed up for it last night, and i have to admit it's pretty slick. I can track all my investments (with 3 different firms), mortgages, spending, etc. I've been playing around with expense tracking this morning. I think it will go a long way in helping me determine what I WON'T need in retirement!

He also recommended Bettermint, which i'm considering using going forward as well (as opposed to the Vanguard Advisors) and hiring a fee based planner as needed.

Gotta check out Bogleheads guide to investing!

 

[MRG]

Oops, just saw on a 72t site the "55 rule for withdrawal from an employee plan AFTER termination of employment". Got it.

Be careful two conditions must be met:
The Summary Plan Description (SPD) has to have the verbage for 55 and terminated.
Sometimes a plan will have that verbage but the plan administrator does not allow for early withdrawals. Seen too many other posters get bit by that second rule. Check into it, you can always do a 72t but they're a little less flexible.

 

[Pilot2013]

My plan allows for 1 withdrawal per year, even before 55. I assume, you could take the withdrawal, pay the tax and penalty, and go forward...

Now that I think about it more, I am still a little confused. I understand that it is up to the plan and administrator about withdrawals, but is the IRS rule that you can withdraw without the 10% penalty from you company 401k only after you have terminated employment? I thought the 72t rule (equal, substantial withdrawals) was the only way to avoid the 10% penalty...

My head hurts now.

 

[MRG]

My plan allows for 1 withdrawal per year, even before 55. I assume, you could take the withdrawal, pay the tax and penalty, and go forward...

Now that I think about it more, I am still a little confused. I understand that it is up to the plan and administrator about withdrawals, but is the IRS rule that you can withdraw without the 10% penalty from you company 401k only after you have terminated employment? I thought the 72t rule (equal, substantial withdrawals) was the only way to avoid the 10% penalty...

My head hurts now.

You're getting it. The 72t has been around for a long time. It's one way to get around the 10% penalty.

The 55 and older and terminated from service is an additional way to gain access. Yes it is due to our friends at the IRS. There's a irs publication that talks to it, can't seen to locate it right now.