42 married with 2 kids… Need advice please.

[cucumber]

I’m new to the forum and am getting a late start on learning about retirement and investing. Been investing with an advisor at Ameriprise for many years but left them recently after reading up on all their fees.

I’m 42 and my spouse is 41. We have 2 kids in elementary school and live in a HCOL state. We gross about $200K annually and only recently started to max out our 401k contributions this year with an additional $26K this year in a mega back door Roth 401k. Our annual expenses are about $85K-$100K.

We have saved up $145K in 401k, $25K in Roth 401k, $265K in traditional IRA, $70K in Roth IRA, $100K in a brokerage account.
$50K and $35K in 529 plans for each kid which we contribute $2K each annually.

Our only debt is a HELOC of $170K at 2.75%.

My wife has a small pension and I also have a pension and retiree medical at age 65. I would like to retire at 55 if possible.

I have a few questions.

How are we doing? Are we on target to retire at age 55?

We would also ideally like to move out of our townhome and purchase a bigger property and rent out our townhome. Is that doable or are there benefits and/or strategies in doing this? Could we lessen our retirement contributions to pay down our HELOC in order to turn it into a rental and move into a bigger home?

Any advice and feedback is much appreciated!!! Thank you in advance!!

 

[Bigdawg]

I’m new to the forum and am getting a late start on learning about retirement and investing. Been investing with an advisor at Ameriprise for many years but left them recently after reading up on all their fees.

You are not new to this forum. You have been posting on here for over 7 years. Forum members are awesome and will give you all kinds of advice and suggestions. But, you need to do the work. You are asking some of the same questions you have asked in the past. Good luck to you sir.

 

[Aerides]

I’m new to the forum and am getting a late start on learning about retirement and investing. Been investing with an advisor at Ameriprise for many years but left them recently after reading up on all their fees.

Per your other threads, you left them in 2014 so I doubt anyone would call that recent. And you've been here asking similar "how am I doing" since then. If you've applied that advice, great!

 

[njhowie]

What is your spending plan when you retire at 55, still $85K-$100K in annual expenses? You've got 7 to 10 years of expenses to cover before SS and/or your pensions kick in - so there's about $1 million that you will spend before reaching full retirement age.

My guess is that you're going to need to have something between $2 million and $4 million if you're going to call it quits at age 55.

I wouldn't use retirement funds to pay down the 2.75% HELOC - that's a really good rate.

We would also ideally like to move out of our townhome and purchase a bigger property and rent out our townhome. Is that doable or are there benefits and/or strategies in doing this? Could we lessen our retirement contributions to pay down our HELOC in order to turn it into a rental and move into a bigger home?

Too many unknowns here and you're likely going to be stretching yourself thin financially. Are you prepared to be a landlord? Accept the risk that it sits empty and you get no income for some period and have to cover a new mortgage? Buying a bigger home is going to be a new additional expense - so your annual expenses are going to gap higher, taking away from potential savings. It's also likely not the best time to be purchasing a new home considering the real estate market. If that is really your plan, I'd seriously consider selling the townhome, pay off the HELOC, and putting the entire remaining amount towards the new home. I'd question if you'd even qualify for a mortgage on a bigger home with your income, annual expenses, and keeping the townhome with the HELOC outstanding.

Just my thoughts.

 

[ivinsfan]

Where did your HELOC money go?

 

[NgineER]

I'm glad to see that you took the advice to drop Ameriprise - good for you! Maxing out your 401k is also great. Since your last thread, you've been able to increase your family gross income by 50% which is also cool. You really need to bolster your investments to retire at 55, I would focus on that rather than your children's 529 at this point, you need all the savings you can get to hit your goal IMO.

You are in HI correct? There it might make sense to rent out your townhouse, could you do a VRBO type short term rental?
You would still have to investigate to understand what the ROI would be on that. Would you also have enough credit to be able to use the HELOC for the downpayment for a larger house? You would also have to do the analysis with the increased cost for a house and whether you would be able to retire at 55 with the increased expenses.

Do not pay down your HELOC, especially not with retirement funds, you have a good rate.

Let us know what you do.

 

[O2Bfree]

Have you plugged your info into FIRECalc yet?

 

[pb4uski]

+1 put your numbers into FIRECalc and be sure to visit the Not Retired? tab... that will give you a good idea if your existing resources and savings are enough for you to retire at 55, but it looks like you are on a good trajectory.

As I read your OP you currently have $605k in retirement savings and are now saving ~$65k a year? At a 6% return that would grow to ~$2.5m by the time that you are 55 and at a 3.85% WR would be $92k of withdrawals... plus you'll have SS and pensions.

 

[ExFlyBoy5]

I’m new to the forum and am getting a late start on learning about retirement and investing. Been investing with an advisor at Ameriprise for many years but left them recently after reading up on all their fees.

I’m 42 and my spouse is 41. We have 2 kids in elementary school and live in a HCOL state. We gross about $200K annually and only recently started to max out our 401k contributions this year with an additional $26K this year in a mega back door Roth 401k. Our annual expenses are about $85K-$100K.

We have saved up $145K in 401k, $25K in Roth 401k, $265K in traditional IRA, $70K in Roth IRA, $100K in a brokerage account.
$50K and $35K in 529 plans for each kid which we contribute $2K each annually.

Our only debt is a HELOC of $170K at 2.75%.

My wife has a small pension and I also have a pension and retiree medical at age 65. I would like to retire at 55 if possible.

I have a few questions.

How are we doing? Are we on target to retire at age 55?

We would also ideally like to move out of our townhome and purchase a bigger property and rent out our townhome. Is that doable or are there benefits and/or strategies in doing this? Could we lessen our retirement contributions to pay down our HELOC in order to turn it into a rental and move into a bigger home?

Any advice and feedback is much appreciated!!! Thank you in advance!!

You said in 2014 that you had left Ameriprise. What's your angle OP? I will be blunt...you are wasting people's time. Yes, many of us are retired and MAY NOT have anything else better to do...but I can assure you that most of us don't want to be snookered with bogus posts.

 

[stepford]

Wow, folks around here can be a bit harsh. So the OP has started three threads, 2 in 2014 and 1 in 2017, and has asked similar questions in them. That doesn't mean he's some Nigerian spy come to scam us out of our retirement savings. Lots of folks have other things going on in their lives and don't focus a lot of their thinking on posting here. It may be just that posting here for an update seems like a good idea occasionally. No reason to rake the poor guy over the coals.

 

[ivinsfan]

Wow, folks around here can be a bit harsh. So the OP has started three threads, 2 in 2014 and 1 in 2017, and has asked similar questions in them. That doesn't mean he's some Nigerian spy come to scam us out of our retirement savings. Lots of folks have other things going on in their lives and don't focus a lot of their thinking on posting here. It may be just that posting here for an update seems like a good idea occasionally. No reason to rake the poor guy over the coals.

The OP original thread in 2014 clearly says he is an ex Ameriprise client. That's a fact... not a rake over the coals. A month after he said he left AM he started another thread about how to actually leave and what to do. He got 8 pages worth of advice on that. So he could come back with better then How Am I doing.


And I still want to know what he did with his HELOC money!!!!

 

[teetee]

Here is the noise I will make: I think the net worth growth rate should be better if you want to retire in 13 yrs.

If both of you can work remotely then perhaps move to a place with lower living expense and do some frugal living work to save more per year? Pay off the HELOC too.

 

[ExFlyBoy5]

Wow, folks around here can be a bit harsh. So the OP has started three threads, 2 in 2014 and 1 in 2017, and has asked similar questions in them. That doesn't mean he's some Nigerian spy come to scam us out of our retirement savings. Lots of folks have other things going on in their lives and don't focus a lot of their thinking on posting here. It may be just that posting here for an update seems like a good idea occasionally. No reason to rake the poor guy over the coals.

Not raking him over the coals. Take 5 minutes to go through and read his posts from 2014 when he WAS new to the forum (not as he claims in the original post). Second verse, same as the first.

I will also add that he's been here as recently as 5:50p and hasn't said another word. Just sayin'

 

[cucumber]

Sorry been working and attending to kids activities and didn’t want to rush a response. Tough crowd though!

All I can say is life happened from work to kids to health over the years and time just flew by. But again everyone has their own struggles in life so not an excuse. Apologies if I offended anyone or caused any anger. My honest intent was to just garner some advice. Sounds like I need to do more studying! Appreciate all the honest feedback and will think twice about posting next time. Thanks again!

 

[ivinsfan]

OP why don't answer some of questions posed to you if you really want feedback? You didn't want to rush a response? You could of actually responded to a few comments in your post instead it's more of the same.


You are getting feedback and questions from some here and just blow us off.

 

[stepford]

Good job everyone. We've preserved the integrity of ER.org and chased off a poster who didn't meet our high standards. Huzzah!

 

[plex]

Numbers seem mostly on track. Some things to consider, all of this is dependent on how well you can handle the next recession, there hasn't been a real one in a very long time, this upcoming one will likely be your first real one. You should probably lock in a fixed rate mortgage if at all possible, if you have not already, in which case, there is no need to rush paying it. Landlording is a part-time self-employed job, just be prepared for that if you are going to do it.

 

[natetheb]

@OP

I do not share the same sentiment as some of the previous posters. I see things differently. I went back and read all of your previous threads and here is what I see:

First, Second, and Third Threads) A person who felt like they were between a rock and a hard place, trying to get out of a terrible financial situation. You finally got out of a terrible financial situation but had no idea what to do at that time. Additionally, it appears that you where overwhelmed by the replies and multitude of good information coming from the forum members.

Fourth Thread) Things have settled down and now you are asking if you are on the right track. You got some good advice (as usual) and proceeded with life.

This Thread) Life got the better of you. Your kids probably took up a bunch of your time. One or both of you was either promoted or changed jobs since your income went up a good bit. Overall, you weren't getting screwed over by an FA, so retirement stuff was probably the least of your worries. You probably forgot about those previous threads and possibly even this forum for a while. Well, you are a bit older now and started thinking about retirement again and remembered this forum. You popped back on and posted up a question and got a whole bunch of undeserved flack for asking a simple question.


Now to my reply from your original post. From what little details you have posted, I think it is going to be tight trying to retire in a HCOL state in 13 years. The biggest question I have is, what is everything invested in? Knowing that will answer if your (currently) $500k retirement savings will grow to nearly $2Mil in roughly 14 years or not.

I second getting a good 3-6 months worth of emergency fund in cash. You never know when Murphy will strike! For example, I had some pretty big plans about paying off our mortgage this year, but one day as I was string trimming around the house I noticed a long crack going up the side of the house....one inspection later and the foundation work we are about to have done is eating up nearly our entire emergency fund. I have had to cut our extra mortgage payments and lower our retirement savings for a number of months to help build our emergency fund back. The point is, I didn't have to dip into any retirement or investment accounts to pay for the emergency.

I am apart of the "no debt" camp. I would argue paying off the HLOC or heavily paying it down would be an excellent place to start.

I do not own any rental properties, but I would be extremely careful getting into that world. You need to fully understand all of the risks and rewards (e.g. good vs. bad tenants, more debt, maintenance, etc.) before taking that leap. I think rental/real-estate can be very rewarding for those that are good at it and know what they are doing, but can be a huge burden for those ill-prepared.

 

[ivinsfan]

@OP

I do not share the same sentiment as some of the previous posters. I see things differently. I went back and read all of your previous threads and here is what I see:

First, Second, and Third Threads) A person who felt like they were between a rock and a hard place, trying to get out of a terrible financial situation. You finally got out of a terrible financial situation but had no idea what to do at that time. Additionally, it appears that you where overwhelmed by the replies and multitude of good information coming from the forum members.

Fourth Thread) Things have settled down and now you are asking if you are on the right track. You got some good advice (as usual) and proceeded with life.

This Thread) Life got the better of you. Your kids probably took up a bunch of your time. One or both of you was either promoted or changed jobs since your income went up a good bit. Overall, you weren't getting screwed over by an FA, so retirement stuff was probably the least of your worries. You probably forgot about those previous threads and possibly even this forum for a while. Well, you are a bit older now and started thinking about retirement again and remembered this forum. You popped back on and posted up a question and got a whole bunch of undeserved flack for asking a simple question.


Now to my reply from your original post. From what little details you have posted, I think it is going to be tight trying to retire in a HCOL state in 13 years. The biggest question I have is, what is everything invested in? Knowing that will answer if your (currently) $500k retirement savings will grow to nearly $2Mil in roughly 14 years or not.

I second getting a good 3-6 months worth of emergency fund in cash. You never know when Murphy will strike! For example, I had some pretty big plans about paying off our mortgage this year, but one day as I was string trimming around the house I noticed a long crack going up the side of the house....one inspection later and the foundation work we are about to have done is eating up nearly our entire emergency fund. I have had to cut our extra mortgage payments and lower our retirement savings for a number of months to help build our emergency fund back. The point is, I didn't have to dip into any retirement or investment accounts to pay for the emergency.

I am apart of the "no debt" camp. I would argue paying off the HLOC or heavily paying it down would be an excellent place to start.

I do not own any rental properties, but I would be extremely careful getting into that world. You need to fully understand all of the risks and rewards (e.g. good vs. bad tenants, more debt, maintenance, etc.) before taking that leap. I think rental/real-estate can be very rewarding for those that are good at it and know what they are doing, but can be a huge burden for those ill-prepared.

What terrible situation are you talking about? The OP has never been in a terrible situation.



Overwhelmed or confused or whatever the OP could answer questions if he really wants advice. The question was far from simple and a few more details would have helped, but you and the OP could have a nice pity party.

 

[natetheb]

What terrible situation are you talking about? The OP has never been in a terrible situation.

Based on all of the replies to OP back in 2014, I concluded that Ameriprise is considered a terrible company. Is that still a valid conclusion? From what I read, OP was in a situation where on one hand he thought was someone whom he believed he could trust giving advice, while on the other is a whole bunch of internet strangers giving opposite advice. Is that not terrible that OP has to resort to seeking information from a whole bunch of internet strangers and question someone he is actually paying for advice?


So having a large sum of money in a terrible company that is giving terrible advice that conflicts with advice from a bunch of internet strangers isn't a terrible situation?

but you and the OP could have a nice pity party.

Whats with insulting OP and I?

 

[MichaelB]

Time to channel some Dale Carnegie, folks. Let’s please remember we’re among friends, so let’s keep it positive.

 

[Magus]

Few comments from me - Too many unknowns to answer for certain.

For example: Renting out your current place can definitely work but being a landlord does have some downside. What's the expected rent vs maintenance/taxes/insurance/HELOC cost with 5-7% vacancy? Do you have a large capital gain on that? If you rent it for too long you'll lose the tax advantage to selling it as well. That said, I'm a huge fan of rentals - I own 8 myself and expect to buy more in next 12 months. Just depends on the state you are in, the cap rate and other investment options.

Second, are your expenses going to change in retirement from current? If you are still going to spend $100k+ inflation over next 13 years, you probably will be a bit tight unless you really increase your savings rate.

Third, are you expecting anything else - big promotion, inheritance, moving to a LCOL area, etc?

Fourth, do you want to leave anything to family, charities, etc or spend it all?

Fifth, how close to do you want to cut it? Also, how much are your pensions? SS timing?

I'd say you are on a good track but with a bit of work could probably trim expenses into the $70kish area, which also would increase your savings rate, and put you well on your way to retiring by 55, perhaps earlier. Anything in your budget you spend a lot on that is a lower value add for you/family?