A Couple Targeting Retirement in 2030

[RetireIn2030]

We are a couple aspiring to retire in 2030 at 54 & 52 and plan to live on taxable accounts until 59 1/2. At that age we will dip into our retirement accounts and then wait until 70 to get delayed full social security (one will be maxed out the other will be 3/4 of the max due to our income over the years). We also will have a small pension monthly to take at 65. We have 3 children still as dependents but looking for them to peel off over the next 3-6 years.

Ages: Couple - M(47), F(45)
Family: 2 College Age Children and 1 High School Age Child
Net Worth: $1.8M
Total Debt: $0
Current Monthly Expenses (1yr/ave): $13.5K
Current Assets: Taxable ($383k), HSA ($12k), Retirement Accounts ($782k), Properties ($635k)
Future Assets: Pension ($545/m), Social Security (Est - $7,655/m)

Investment Allocation: 100% Equities - 50% S&P 500 (FXAIX), 25% Tech Growth (VGT), 25% Nasdaq 100 (QQQ)
Retirement Tools Used: Fidelity Planner, New Retirement, Empower Portal, Portfolio Visualizer


Retirement Goals (in today's Dollars)

Horizon: Jun 2023 - Dec 2023 Full Retirement
Retirement Target Ages: M(54), F(52)
Target Assets: Retirement Accounts (401k/403b/TIRA/RIRA) - $1.3M, Bridge Savings (Cash/Brokerage) - $525K
Target Monthly Expenses: $8K
Social Security: M(70), F(70)
Pension: F(65)


Plan to 2030

Budget: We have constructed a solid budget over the past few years to watch where money is being spent to be able to cut our monthly output and to predict our expenses at our retirement target. We continue to monitor it monthly and drive expenses down and to a predictable level.

Reduction of Expense: We have paid off our debt to reduce our average monthly output. The past quarter we have reduced our monthly expenses by $3k on average, which is a huge win for us. Over the next 5 years our children will be financially "off our purse" and will reduce our expense footprint even more. We are also relocating across the country intentionally to reduce our expenses.

Relocation: We are relocating 1000 miles away to save over $2k monthly off our expenses. That move includes building a beautiful brand new fully custom house a stones throw from a lake. Living in the northeast has extremely high taxes, heating costs and electricity costs. Migrating south is a huge part of us being able to retire many years early and lowering our targets.

Focus on Health: One of the keys to a successful long retirement is to stay out of the doctors/hospitals and requiring medications/procedures. We are extremely active and eat a clean diet (plant based for 12+ years). Anything can happen even to those that do, but the science is on our side at least statistically to try to reduce the amount we need to spend on healthcare by just putting in the work (walking 10+ miles a day, strength training).

Investment Allocations: We plan over the next 2-3years to stay ultra aggressive in our investing to try to hit our retirement asset numbers early and then the rest is bonus for us to up our monthly expenses if we want in the future. Since we will be living off cash/brokerage for the first 5 years we can let those retirement assets continue to gain ground. We will still utilize our High Yield Savings and Money Market accounts to generate some money on what we plan to live off of once we hit our targets. As get closer to 54/52, we might start switching out some of our retirement funds progressively into more of a 70/30. This really is undetermined at the moment and something that does keep us up at night.

Savings Rate: For the next 3-4years we plan to continue to put $92k+ into savings broken up into 401k (max), 403b (max), TIRA x 2 (max), HSA (max), Brokerage/High Yield Savings $24k+). Our current taxable on hand will decrease with a sizable capital gains tax bill in '24 and utilizing most of it on our new home construction. This will be an area we need to focus on to build in order to bridge to 59.5. Thus from years 4-6/7 we will start to peel back on retirement savings and direct it more into taxable savings.

It's amazing to see so many people with the same goals as we have. Looking forward to learning and following your journeys!

 

[finnski1]

Welcome from another NH retiree. We are in SW NH with no plans to ever leave.

$8k/month on $1.8m in assets works out to a 5.3% WR at ages 52 and 54. That would scare me and be too rich for my blood. I would want to be around $6k/month with those numbers. Especially with no pension till 65 and ss @ 70 for both.
I know you didn't ask for any advice, just my casual observation.

 

[RetireIn2030]

Truly appreciate the feedback and nice to meet you! That's why we are on here to continually learn and improve our planning.

Getting to 6k a month will be tough with private health insurance being as high as it appears to be pre-Medicare. We are budgeting 2k a month for that alone. If we did not have that as such a large expense we could be at the 6k mark. Our budget does have decent amounts of travel/entertainment built in for our younger Go Go years, which we expect to reduce as we age.

I do not envision we would reduce our monthly expenses drastically lower than $7-8k while we are young, which would mean we would need to increase our saving targets to be higher than the $1.8m... which is feasible based on our savings rate and potential returns on investments. Our savings rate will increase upon moving which would add another $25k annually for 5 years before we are targeting retirement. We are at $1.1m now and targeting to add $744k in savings to that over the next 7 years. That would put us around the $1.8m mark with no investment returns built in. We no there are no guarantees in investing and can lose though.

 

[brett]

We did not do nearly the due diligence on the financial side. Did not consult a financial advisor. I can do numbers. The process for us was very straightforward. Clearly you know the numbers and the cost estimates better than any stranger.

We used that last four years after tax spend as a base. Added more for travel.

Adjusted for inflation. Added 10 percent for just in case. Assumed equity would grow conservatively at 2 points over inflation. Looked at after tax cash flow.

We did engage some professional tax advice related to our jurisdiction that has proven to be very beneficial for the past 12 years. Next year we will revisit this for another go forward tax plan.

We were wrong on most counts with one exception. After 12 years our spend number is very, very close to our projected spend that we did 12 years ago. Equity is now more than double. No skill, just dumb luck and a good investment advisor.

My comment to you would be have you spent the same amount of time planning want you want from retirement and how you wish to spend it as you clearly did on the math?

Our lifestyle changed completely. As did our eating habits after 9 months of travel. Much healthier eating, more exercise. Not planned, it just happened as a result of where and how frequently we traveled. Now, we very seldom eat prepared foods, junk foods, fast foods. We lost the taste for it. All in all it made us both feel much healthier. Much more fresh fruit, salad, seafood, much less red mean, bread, etc.

One noticeable change that we did not anticipate was a gradual focus on 'experiences' over 'things'. We downsized considerably and moved. But we still have a few unpacked boxes of 'things', mostly dishes/crystal and tools that remain unpacked, unused after 13 years!

I have no doubt you have done the math and know where you plan to relocate. But what about after the move, six or twelve months in your new home?

We started early retirement with each of us having a bucket list. We have traveled multiple times to Europe, SE Asia, Australia, USA, Central America/Mexico and Africa, South America. Mostly independent land trips with several last minute cruises. Our respective bucket lists are now longer than they were when we retired! Go figure.

 

[ivinsfan]

Where are you getting you HI numbers? They seem high? Have you done any research on ACA plans and income limits.


On the SS, both at 70? Depending on each of your SS number that might not be optimal. Have you run the numbers.

 

[finnski1]

Truly appreciate the feedback and nice to meet you! That's why we are on here to continually learn and improve our planning.

Getting to 6k a month will be tough with private health insurance being as high as it appears to be pre-Medicare. We are budgeting 2k a month for that alone. If we did not have that as such a large expense we could be at the 6k mark. Our budget does have decent amounts of travel/entertainment built in for our younger Go Go years, which we expect to reduce as we age.

I do not envision we would reduce our monthly expenses drastically lower than $7-8k while we are young, which would mean we would need to increase our saving targets to be higher than the $1.8m... which is feasible based on our savings rate and potential returns on investments. Our savings rate will increase upon moving which would add another $25k annually for 5 years before we are targeting retirement. We are at $1.1m now and targeting to add $744k in savings to that over the next 7 years. That would put us around the $1.8m mark with no investment returns built in. We no there are no guarantees in investing and can lose though.

Based on the present ACA costs, if you can manage your MAGI you could conceivably reduce the health care costs significantly from your $2k estimates. Though I can see the benefit of planning for the worst case.
You may easily be able to cut that in half or even further. You can go on healthcare.gov and simulate what your premiums would be by putting in different income scenarios.

 

[RetireIn2030]

We did not do nearly the due diligence on the financial side. Did not consult a financial advisor. I can do numbers. The process for us was very straightforward. Clearly you know the numbers and the cost estimates better than any stranger.

We used that last four years after tax spend as a base. Added more for travel.

Adjusted for inflation. Added 10 percent for just in case. Assumed equity would grow conservatively at 2 points over inflation. Looked at after tax cash flow.

We did engage some professional tax advice related to our jurisdiction that has proven to be very beneficial for the past 12 years. Next year we will revisit this for another go forward tax plan.

We were wrong on most counts with one exception. After 12 years our spend number is very, very close to our projected spend that we did 12 years ago. Equity is now more than double. No skill, just dumb luck and a good investment advisor.

My comment to you would be have you spent the same amount of time planning want you want from retirement and how you wish to spend it as you clearly did on the math?

Our lifestyle changed completely. As did our eating habits after 9 months of travel. Much healthier eating, more exercise. Not planned, it just happened as a result of where and how frequently we traveled. Now, we very seldom eat prepared foods, junk foods, fast foods. We lost the taste for it. All in all it made us both feel much healthier. Much more fresh fruit, salad, seafood, much less red mean, bread, etc.

One noticeable change that we did not anticipate was a gradual focus on 'experiences' over 'things'. We downsized considerably and moved. But we still have a few unpacked boxes of 'things', mostly dishes/crystal and tools that remain unpacked, unused after 13 years!

I have no doubt you have done the math and know where you plan to relocate. But what about after the move, six or twelve months in your new home?

We started early retirement with each of us having a bucket list. We have traveled multiple times to Europe, SE Asia, Australia, USA, Central America/Mexico and Africa, South America. Mostly independent land trips with several last minute cruises. Our respective bucket lists are now longer than they were when we retired! Go figure.

We have given thought to this, although it is 6/7 years away (from retirement). We will be relocating in 1.5 years and will have 5 years to get acclimated in our new area before retirement. We plan on focusing more on exercising, spending time on hobbies (hiking, kayaking, gardening, reading) and fitting in a 2-3 trips a year traveling. Being so focused in our careers and raising a family, it’s hard to fit in hobbies so we are looking forward to it. We are moving to a resort retirement community which has everything perfect for our passions. We won’t be bored, that’s for sure. They have gold course, hiking trails, lakes, pickleball, tennis, weekly concerts, etc. We have 12k allocated a year for travel as we anticipate in our 50s and 60s we will be cruising more and taking all the trips we can’t do now in life.

 

[RetireIn2030]

Where are you getting you HI numbers? They seem high? Have you done any research on ACA plans and income limits.


On the SS, both at 70? Depending on each of your SS number that might not be optimal. Have you run the numbers.

Thanks for the advice. We will start digging more on the ACA plans. The numbers we started with were worst case scenarios we have seen. We are hoping it’s more like 900-1000$ for both of us rather than 2000$ as that drastically changes the total number needed. We have discussed maybe going part time as well just to cover insurance if it’s too much in the private sector.

We have simulated the SS age rates and looked like 70 was optimal and covers all our projected expenses with the pension plan. (~8.2k mon). There is comfort in knowing we won’t need drastic amounts to supplement after 70.

 

[TheWizard]

OP seems to be doing well in planning ahead.
In my 11th year of retirement, I would say it's helpful to understand your basic expenses in retirement but then also target a Desired Retirement Income quite a bit more than the basic level.

This allows me to travel a lot, including a 30-day road trip back in Sept/Oct. I was also able to buy my new car for cash a few weeks ago...

 

[pjigar]

We had a similar financial/expense profile as you about a decade earlier. We had similar plans and thought process as you a decade earlier. And we also made the numbers work on paper. You can always make the numbers work on paper! But we decided to stay course and build a better plan.

Few comments on assumptions:
* Target expenses. Take it with a grain of salt. Ask yourself: Why are my current expenses so high? If I take away disappearing expenses (e.g. mortgage, tuition, etc.), am I adding the new expenses (e.g. healthcare, hobby, entertainment, travel, etc.)? Am I accounting for lumpy expenses (car, roof, HVAC, windows, etc.)? What about charity aspirations? All I am trying to point out is that your target expenses may NOT be on target after everything is said and done. It is very hard to scale back the lifestyle, ask me how I know. Conventional wisdom is that your retirement expenses will be 80% of your current expenses which has been mostly accurate for us. YMMV. PS: We have had expenses as high as 11K a month at some point and we have successfully brought them down over a decade but there is only so much fat you can trim before impacting your lifestyle. We are not RE yet.

* Moving: Unless you have strong family ties with the new destination, your chances of successful move are 50-50. A lot of people move back and/or split stay. I won't bet my farm on any expenses saved by moving. Having said that, we did bank on geo-arbitrage just like you are trying. The difference is that we have already moved to a low-cost place since last 3 years and we are happy here. Now, we can bake in the saved expenses for retirement planning. YMMV. Don't count your chickens before they hatch.

 

[brett]

We have given thought to this, although it is 6/7 years away (from retirement). We will be relocating in 1.5 years and will have 5 years to get acclimated in our new area before retirement. We plan on focusing more on exercising, spending time on hobbies (hiking, kayaking, gardening, reading) and fitting in a 2-3 trips a year traveling. Being so focused in our careers and raising a family, it’s hard to fit in hobbies so we are looking forward to it. We are moving to a resort retirement community which has everything perfect for our passions. We won’t be bored, that’s for sure. They have gold course, hiking trails, lakes, pickleball, tennis, weekly concerts, etc. We have 12k allocated a year for travel as we anticipate in our 50s and 60s we will be cruising more and taking all the trips we can’t do now in life.

Good on you for looking ahead.

I see so much focus on retirement numbers. In most instances that I see the numbers are a no brainer. The math is a straightforward bottom line number with the usual allowance for variances.

For us the numbers were really an enabler for the post retirement puzzle. We consider ourselves to be very fortunate and to enjoy very good health.

 

[ivinsfan]

Thanks for the advice. We will start digging more on the ACA plans. The numbers we started with were worst case scenarios we have seen. We are hoping it’s more like 900-1000$ for both of us rather than 2000$ as that drastically changes the total number needed. We have discussed maybe going part time as well just to cover insurance if it’s too much in the private sector.

We have simulated the SS age rates and looked like 70 was optimal and covers all our projected expenses with the pension plan. (~8.2k mon). There is comfort in knowing we won’t need drastic amounts to supplement after 70.

Fair enough but generally speaking most couple don't wait until they both turn 70 to draw SS. Why, because when one of your dies, one check vanishes and you would keep the larger of the 2 checks. This means you still need cash reserves for the first death. One collecting earlier then 70, say at FRA somewhat mitigates that issue.

 

[Dtail]

What retirement score did you achieve at Fidelity?
Having higher than 4%WR for a few years early in retirement is not necessarily a worrisome concept.

 

[OldShooter]

...

Net Worth: $1.8M
...
Current Assets: Taxable ($383k), HSA ($12k), Retirement Accounts ($782k), Properties ($635k) ...

Does the $635K "properties" number include the house you're living in? The house is definitely part of your net worth but is not generally considered to be an investable asset for retirement. You have to live somewhere.

Withdrawal rate calculations should be based on investable assets, not on net worth.

... $8k/month on $1.8m in assets works out to a 5.3% WR at ages 52 and 54. That would scare me and be too rich for my blood. ...

If a significant part of the $635K is your house, @finnski's withdrawal rate calculation could be as high as 8.2% -- definitely not tenable.