Gremlin
Recycles dryer sheets
- Joined
- Jul 3, 2019
- Messages
- 321
53 yo wife and mother of three desires input regarding her plan for catch up retirement savings for next 10 years prior to retirement. My apologies in advance for the long post. Here are the facts:
1) I am the “main” breadwinner w*rking same hospitalist job for last 18 years but w*rked very part time for the last 15 of those years because a) full time w*rk (as it was structured then) was killing me but mostly because b) I had to drastically cut back hours/go non-contracted to home school my oldest DD from 2nd through 12th grade (she had spent the first 7 years of her life in a Chinese orphanage - all of our kids are adopted and have/had various learning/behavioral/emotional issues)
2) 57 yo DH is a former contractor turned “stay-at-home” Dad, acting CFO of our household and our mechanic/maintenance/handyman. He singlehandedly built our last three homes, allowing us to sell them and earn tax free $ (all earmarked for debt reduction/retirement) during the years my take home pay was greatly reduced.
3) kids are now grown and mostly on their own. So I just increased my hours and signed a contract again which more than doubles my income and allows me access to a 403b and affordable healthcare. My goal is to save as much as I can for retirement between now and the age of 63 and call it quits.
But, I need a plan!
DH has an inherent distrust of all things Wall Street. He favors investing in things that will save us money in the future. We are now two years into living in our 150 sq foot RV while we build our dream retirement home, a passive solar house (our version of an earthship, minus the use of recycled garbage as building materials and forgoing the Lord of the Rings, hobbit-y look LOL) with attached greenhouse.
Up until recently, I had very little knowledge about investing other than real estate rentals (my parents chosen retirement vehicle). DH supports my objective but doesn’t have much interest in participating in the decision making. I’ve spent the last 4-5 months reading this amazing forum, some time on the Bogleheads forum and Physician on Fire website as well as reading Bogleheads Guide to Investing, Bernstein’s If You Can, and The Coffee House Investor (thanks Old Shooter especially for that last recommendation, my favorite)
Where we are now:
Financials:
Zero debt, including no mortgage, school loans, or car payments
Paid for 40 acres with ability to sell off two 10 acre parcels if need be
4KW Solar system/batteries - we are not grid connected but we do use propane to heat our motorhome ( tiny living at its finest!)
Partially built passive solar home on aforementioned 40 acres, with new pole barn, well, septic
A small fleet of older vehicles my husband keeps running with plans to buy a newish one closer to retirement
Our current financials:
1) Current Taxable total 437K
-250 K in 3.4% 7 yr CD
-25k in 3.35 % 7 yr CD
-78 K left in owner financed mortgage (from last house sale) at 4%
-25k (Max for this account) in checking that earns 2.53%
-64 K in other checking/savings (most of which will be used to finish building our home)
-7 oz gold $10, 300
-540 oz silver $ 9200
2) Current Tax deferred total: 56 k in a 401a currently all invested in Wellesley admiral shares ( company $ contributed during my non contract/part time years)
Expenses: unclear as hubby didn’t separate the house-building expenses from our living expenses. We have started digging into this/keeping better track and it is about 45 k a year, excluding big ticket surprises. So I’m using 55 k for now
Tax bracket now is 24%
Tax bracket when I retire . . .? Likely less, maybe?
What I’ve decided so far:
-DH will take his small SS starting at 62. I will have 7 years from retirement until I plan to start SS at 70, as I am the major breadwinner - I am also the one with a history of family longevity, FWIW. Hubby will then take his spousal off of mine (larger than his alone) We would be living very comfortably (for us) on our combined SS as it is predicted now - 68,400 k a year. We would be living ok on 75% of predicted SS - 47,800k a year. If one of us dies first before then, we are both comfortable making adjustments.
-I plan for us to live off of the tax deferred accounts from 63 until I take SS at 70, so that will help with any RMD tax torpedo issues (although not likely to be too big of a problem d/t our late start with tax deferred accounts)
Going forward:
-I’ve maxed out my 403b to include catch up contributions
-my company places 2% of my salary in 401a
-I will be placing 1/2 my take home pay (about 60 k a year) into 3 accounts: backdoor Roth, one each for DH and I, with leftover monies going into a taxable account.
-my goal is simplicity with a 3 fund portfolio of roughly 70 equity/30 bonds (I’ve decided to ignore our current monies in cd’s, cash, and our small stash in gold, silver, real estate. Yes, I realize money is fungible but I can’t easily change what I have now so I simply decided to be more aggressive in my equity allocation than I would have been otherwise. Besides, every time I try to figure out an AA that takes into account our current stash, my financially challenged brain explodes.)
Total saving over next 10 years:
Tax deferred =40 k/yr (403 b + 401 a) x 10 yrs = 400,000
Tax free: Yearly backdoor Roth x2 = 14 k/yr x 10 years =140,000
The rest of savings into Taxable account = 60 k per year x 10 yrs. = 600,000
Of course, this is only the money we will be contributing/saving. What happens to the totals will be massively impacted by a) what investments I choose b) what the market does c) the tax efficiency of my investment choices e) unforeseen catastrophes d) lots of things I’m sure I haven’t thought of yet.
TLR
Here is where I’d like feedback:
1) choice of funds: VTI Vanguard Total Stock Market, VXUS Vanguard Total International Stock Market, VBTLX? Wellesley?
2) Allocation placement of said funds:
-I’m planning on placing all the equities in the taxable and Roth accounts,
-all “bonds” will be kept in 403b/401k
My specific thoughts/questions:
1) I like Wellesley and am less excited by a total bond fund, like VBTLX. Maybe because Wellesley is all I have any experience with. Would it be stupid to place all my 403b/401a contributions in Wellesley and just use its 75% bond allocation as my bond allocation? I guess this would complicate my AA and my ability to rebalance. Thoughts?
2) looking forward in regards to taxable account: to keep capital gains low, I hear ETFs are more tax efficient than MF. Does this fit with personal experience here?
3) I really like the simplicity of VTSAX as one stock for the whole world, but I also like the idea of separating my international equities from my domestic ones placing 70% in VTI and 30% in VXUS. This will also allow me to have a little more control over my percent of domestic and international allocations ( I’m thinking 70/30) This seems pretty doable but I’d love to hear other people’s thoughts on this. Too complicated? Not worth the extra work?
4) any other glaring errors in plans to date?
Thanks to all of the regular posters who impart such fabulous words of advice! The sometimes dissenting opinions helped me crystallize my own views.
1) I am the “main” breadwinner w*rking same hospitalist job for last 18 years but w*rked very part time for the last 15 of those years because a) full time w*rk (as it was structured then) was killing me but mostly because b) I had to drastically cut back hours/go non-contracted to home school my oldest DD from 2nd through 12th grade (she had spent the first 7 years of her life in a Chinese orphanage - all of our kids are adopted and have/had various learning/behavioral/emotional issues)
2) 57 yo DH is a former contractor turned “stay-at-home” Dad, acting CFO of our household and our mechanic/maintenance/handyman. He singlehandedly built our last three homes, allowing us to sell them and earn tax free $ (all earmarked for debt reduction/retirement) during the years my take home pay was greatly reduced.
3) kids are now grown and mostly on their own. So I just increased my hours and signed a contract again which more than doubles my income and allows me access to a 403b and affordable healthcare. My goal is to save as much as I can for retirement between now and the age of 63 and call it quits.
But, I need a plan!
DH has an inherent distrust of all things Wall Street. He favors investing in things that will save us money in the future. We are now two years into living in our 150 sq foot RV while we build our dream retirement home, a passive solar house (our version of an earthship, minus the use of recycled garbage as building materials and forgoing the Lord of the Rings, hobbit-y look LOL) with attached greenhouse.
Up until recently, I had very little knowledge about investing other than real estate rentals (my parents chosen retirement vehicle). DH supports my objective but doesn’t have much interest in participating in the decision making. I’ve spent the last 4-5 months reading this amazing forum, some time on the Bogleheads forum and Physician on Fire website as well as reading Bogleheads Guide to Investing, Bernstein’s If You Can, and The Coffee House Investor (thanks Old Shooter especially for that last recommendation, my favorite)
Where we are now:
Financials:
Zero debt, including no mortgage, school loans, or car payments
Paid for 40 acres with ability to sell off two 10 acre parcels if need be
4KW Solar system/batteries - we are not grid connected but we do use propane to heat our motorhome ( tiny living at its finest!)
Partially built passive solar home on aforementioned 40 acres, with new pole barn, well, septic
A small fleet of older vehicles my husband keeps running with plans to buy a newish one closer to retirement
Our current financials:
1) Current Taxable total 437K
-250 K in 3.4% 7 yr CD
-25k in 3.35 % 7 yr CD
-78 K left in owner financed mortgage (from last house sale) at 4%
-25k (Max for this account) in checking that earns 2.53%
-64 K in other checking/savings (most of which will be used to finish building our home)
-7 oz gold $10, 300
-540 oz silver $ 9200
2) Current Tax deferred total: 56 k in a 401a currently all invested in Wellesley admiral shares ( company $ contributed during my non contract/part time years)
Expenses: unclear as hubby didn’t separate the house-building expenses from our living expenses. We have started digging into this/keeping better track and it is about 45 k a year, excluding big ticket surprises. So I’m using 55 k for now
Tax bracket now is 24%
Tax bracket when I retire . . .? Likely less, maybe?
What I’ve decided so far:
-DH will take his small SS starting at 62. I will have 7 years from retirement until I plan to start SS at 70, as I am the major breadwinner - I am also the one with a history of family longevity, FWIW. Hubby will then take his spousal off of mine (larger than his alone) We would be living very comfortably (for us) on our combined SS as it is predicted now - 68,400 k a year. We would be living ok on 75% of predicted SS - 47,800k a year. If one of us dies first before then, we are both comfortable making adjustments.
-I plan for us to live off of the tax deferred accounts from 63 until I take SS at 70, so that will help with any RMD tax torpedo issues (although not likely to be too big of a problem d/t our late start with tax deferred accounts)
Going forward:
-I’ve maxed out my 403b to include catch up contributions
-my company places 2% of my salary in 401a
-I will be placing 1/2 my take home pay (about 60 k a year) into 3 accounts: backdoor Roth, one each for DH and I, with leftover monies going into a taxable account.
-my goal is simplicity with a 3 fund portfolio of roughly 70 equity/30 bonds (I’ve decided to ignore our current monies in cd’s, cash, and our small stash in gold, silver, real estate. Yes, I realize money is fungible but I can’t easily change what I have now so I simply decided to be more aggressive in my equity allocation than I would have been otherwise. Besides, every time I try to figure out an AA that takes into account our current stash, my financially challenged brain explodes.)
Total saving over next 10 years:
Tax deferred =40 k/yr (403 b + 401 a) x 10 yrs = 400,000
Tax free: Yearly backdoor Roth x2 = 14 k/yr x 10 years =140,000
The rest of savings into Taxable account = 60 k per year x 10 yrs. = 600,000
Of course, this is only the money we will be contributing/saving. What happens to the totals will be massively impacted by a) what investments I choose b) what the market does c) the tax efficiency of my investment choices e) unforeseen catastrophes d) lots of things I’m sure I haven’t thought of yet.
TLR
Here is where I’d like feedback:
1) choice of funds: VTI Vanguard Total Stock Market, VXUS Vanguard Total International Stock Market, VBTLX? Wellesley?
2) Allocation placement of said funds:
-I’m planning on placing all the equities in the taxable and Roth accounts,
-all “bonds” will be kept in 403b/401k
My specific thoughts/questions:
1) I like Wellesley and am less excited by a total bond fund, like VBTLX. Maybe because Wellesley is all I have any experience with. Would it be stupid to place all my 403b/401a contributions in Wellesley and just use its 75% bond allocation as my bond allocation? I guess this would complicate my AA and my ability to rebalance. Thoughts?
2) looking forward in regards to taxable account: to keep capital gains low, I hear ETFs are more tax efficient than MF. Does this fit with personal experience here?
3) I really like the simplicity of VTSAX as one stock for the whole world, but I also like the idea of separating my international equities from my domestic ones placing 70% in VTI and 30% in VXUS. This will also allow me to have a little more control over my percent of domestic and international allocations ( I’m thinking 70/30) This seems pretty doable but I’d love to hear other people’s thoughts on this. Too complicated? Not worth the extra work?
4) any other glaring errors in plans to date?
Thanks to all of the regular posters who impart such fabulous words of advice! The sometimes dissenting opinions helped me crystallize my own views.