Getting ready I think

[ccjarider]

Hi folks,

We are a 55 yr old married couple currently living in Oregon.

I have been in Engineering management for 20 plus years and am getting tired of rat race. Company was just bought out and having been through this 3 times, I know there will be much change ahead.

I believe company values my service and i am not necessarily worried about being riff'd but one never knows.

I would like to know if you feel I could pull the plug at 60. here are some details.

Retirement $
1 million in tax deffered (401k and IRA)
300K in tax free (Roth)
350 K in taxable accts.

55 k mortgage on 300k home to be paid off when we are 60.

There is also a 250K beach home that generates about 20K income and has a 140k mortgage. Not sure if we would keep in retirement. Would sell if it makes sense to retire.

We currently earn about $180K/annually. Save 25% of gross.
Desired income 70-80k in retirement and we would like ot hold off on SS until 70.

No pensions

What would you recommend?
Look forward to your thoughts.
Thanks much

 

[travelover]

I'd consider these questions: http://www.early-retirement.org/for...-answer-before-asking-can-i-retire-69999.html and I'd plug my numbers into Firecalc (bottom of page)

 

[rodi]

I agree with looking at the FAQ linked above, and in running firecalc.

I retired after one merger/acquisition/spinoff too many. (My group/division kept changing corporate overlords.... )

You say your combined income is $180k, and that you save 25%. So that's a current spend rate of $135k. Once you retire you'll lose medicare and SS taxes... but you'll probably increase your health insurance until you get to medicare age.

How do you get from 135k to 70-80k in retirement? That's pretty significant. IMO, you probably need to look at where you are currently spending money - and decide if it's something you'll be ok doing without in retirement. If so - cut it now and plow that money into savings.

I had the epiphany that spending was the *key* to preparing to retire. As I figured out ways to trim the annual spending, that had low impact on quality of life, I plowed that money into savings. It helped me realize my spending number was lower than originally planned (requiring a smaller nest egg) AND helped me reach my nest egg goal sooner (because of the additional savings invested.)

To look for low hanging fruit to cut in spending - look at your recurring bills. Phone/cellphone/cable/utilities/yard care/house cleaning/groceries.... If it is recurring, then even small savings can add up to decent annual savings.

Good luck!

 

[golfnut]

Given your annual contributions and assuming a 3% annual growth rate (conservative), your nest egg should be in area of 2.3mm. Then withdrawing 3.5% should get you $80,000. I see no problem retiring in 5 yrs if your spend rate is indeed $80,000. Selling your beach home would be icing on the cake or better yet, sell your primary home and move into the beach house.

 

[aida2003]

Welcome to the board!

You don't mention your family situation. Are you DINK's?
Like Rodi, I'm also curious about your spending. Not the size of portfolio but the annual spending is in the 'driver's seat' here. Do you track your spending? If not, I'd strongly advise to start tracking for 6-12 months to get an idea what's going on.

When you say 25% saving of gross, do you imply across all accounts? You're over 50, so you can save 2*$23k in your 401k's (if both working), then 2*$6K in Roth IRA's, total of $56K, but say you save only $45K. Short, IMO.

Check your SS estimates.

In summary, it would be very doable for my spouse and me on the size of your portfolio, but our expense budget is lower too.

However, compared to average American you're doing a fantastic job nevertheless

 

[ccjarider]

Thanks for replies.

We have two grown children. They are successful and living on there own.

Regarding savings;
1. I max out 401k at 23k and have a company match about 12k.
2. Wife only puts in about 6-8K in hers. I have tried for years to get her to put in more. No luck - she's stubborn.
3. Both Roth IRA's are funded for a total of 13K
4. Taxable savings averages around 3K/mo. (36k)

Total savings (with company match) is 90K.
I guess our savings is close to 45-50% of gross income. Sorry for error.

Thank you for advice on really understanding expenses. I have vague ideas but have never really tracked specifics. I have run firecalc and it looks to be good.

 

[aida2003]

2. Wife only puts in about 6-8K in hers. I have tried for years to get her to put in more. No luck - she's stubborn.

I have run firecalc and it looks to be good.

We're a conservative bunch here. Firecalc can say 100% and we still want a cushion, etc.

It sounds as if your wife is not really on board with you. She wants to retire but not save for it? Not sure I get this part. It also sounds that you both maintain separate accounts for spending... You should both have a nice sit-down and chat about your plans for the future and cover savings and spending.

 

[Another Reader]

"Thank you for advice on really understanding expenses. I have vague ideas but have never really tracked specifics. I have run firecalc and it looks to be good."

I would not agree with this statement. For any retirement calculator to yield reliable results, you need a thorough understanding of your expenses and you don't have that. That is especially true if you and your wife are not on the same page about saving and spending now and in retirement.

 

[Katiek]

Welcome. Can't agree more with the need for a clear understanding of expenses. I never really tracked them carefully, but after coming to the board I tracked everything for a year (that's more helpful than a few months because you pick up one time expenses such as property taxes but also a range in gas/electricity for all 4 seasons). I'm on my second year of tracking now, and have a much better idea of what my life actually costs, and what costs might change (either higher or lower) with retirement.

I'd also suggest making sure you and your wife are in sync on your budget. Does she envision retirement as the time to do much more extensive travel or make home renovations she put off while working?

Your careful saving has given you a nice foundation for the future and just a few more details can help improve your planning. Welcome!