Hi everyone!
I am 43, my wife is 38, and we have two kids (4 and 3). We'll likely work thru 2018 and then decide if we make the jump. Since we're down to one more year, I'm starting to seriously crunch the numbers and work out a plan. I appreciate any and all feedback on my plan!
Finances:
Annual expenses: $72,000 + $18,000 for mortgage
Royalty income: $25,000
(This bounces around and could always go to zero, so it is hard to plan. My hope is that with lots of free time, this number is more likely to go up than down. Think of it as a hobby that makes money.)
Taxable: $1,150,000
Tax deferred: $1,275,000
529 savings: $70,000
House is worth $480,000
Mortgage balance: $130,000
(15yr mortgage @ 3% to 2027 @ $18K per year)
SSA predicts I'll receive 33K per year in ss at 70. Wife gets $10K per year at 62. As she may outlive me by 10 years, I want to maximize her survivor benefit.
Withdrawal rate scenarios:
Asset allocation:
Currently, I'm 85-15 stocks to bonds. I think we're more likely to repeat last year than perma-crash, so I haven't locked things down yet. My reasoning is we both have good paying jobs that we're unlikely to lose, so if the market crashes, we work another couple years and possibly retire closer to a market bottom instead of a market top. There are worse things in life.
When we do retire, I plan on dropping back to 60-40 and doing a reverse glidepath back to 75-25 over several years. This leads to my concerns...
My concerns:
Anything I'm missing? How does this look to you?
Thanks!
I am 43, my wife is 38, and we have two kids (4 and 3). We'll likely work thru 2018 and then decide if we make the jump. Since we're down to one more year, I'm starting to seriously crunch the numbers and work out a plan. I appreciate any and all feedback on my plan!
Finances:
Annual expenses: $72,000 + $18,000 for mortgage
Royalty income: $25,000
(This bounces around and could always go to zero, so it is hard to plan. My hope is that with lots of free time, this number is more likely to go up than down. Think of it as a hobby that makes money.)
Taxable: $1,150,000
Tax deferred: $1,275,000
529 savings: $70,000
House is worth $480,000
Mortgage balance: $130,000
(15yr mortgage @ 3% to 2027 @ $18K per year)
SSA predicts I'll receive 33K per year in ss at 70. Wife gets $10K per year at 62. As she may outlive me by 10 years, I want to maximize her survivor benefit.
Withdrawal rate scenarios:
- Assuming no royalties, I have a 3.6% withdrawal until 2027 (mortgage) and then 2.9%.
- Assuming royalties, this drops to a 2.6% withdrawal until 2027 and then 2% thereafter.
- If I dumped the mortgage, I'd have a 2% withdrawal with royalties. Without royalties, it would jump to 3%.
Asset allocation:
Currently, I'm 85-15 stocks to bonds. I think we're more likely to repeat last year than perma-crash, so I haven't locked things down yet. My reasoning is we both have good paying jobs that we're unlikely to lose, so if the market crashes, we work another couple years and possibly retire closer to a market bottom instead of a market top. There are worse things in life.
When we do retire, I plan on dropping back to 60-40 and doing a reverse glidepath back to 75-25 over several years. This leads to my concerns...
My concerns:
- Sequence of return risk. I can help mitigate this with the reverse glidepath and by paying down the mortgage or using the money as an emergency fund. Ensuring the royalty is my best mitigation, though, as a 2% withdrawal rate should be safe.
- Health care. If our AGI is under 67K, the kids would be covered by the state of Minnesota. I like the sound of that. We could handle a doubling, or tripling, but this expense cannot infinitely grow. This remains a big unknown that will likely get worse before it gets better, but as a family of 4, we're well subsidized and should be better off than most.
- Two kids concurrently in college. I do not plan on further 529 contributions as I don't want to overfund it. I'm currently estimating $25K per year per kid for a state university education from 2031 to 2035. By the time we get to 2031, we should have a good idea if this retirement thing is working out and what we can actually contribute. It may be a lot more, or they may have to fend for themselves (and we free up $50K per year in our plan).
Anything I'm missing? How does this look to you?
Thanks!