Hello! Soliciting input on retirement plan

[Vacation4us]

Why only 60 k more in 401 k over 4 years? Since your over 50 are you maxing contributions plus cach up contributions? You should be able to max out at almost 25 k a year for you alone. If you max out your 401k's then you AGI should be low enough to max out both Roth's.

 

[downrod]

Why only 60 k more in 401 k over 4 years? Since your over 50 are you maxing contributions plus cach up contributions? You should be able to max out at almost 25 k a year for you alone. If you max out your 401k's then you AGI should be low enough to max out both Roth's.

Its 60K per year. 25K each for 401K, 5K each for Roth. Even maxing out the 401Ks, we each had to pull 1500 from our Roths last year.

 

[ivinsfan]

Why only 60 k more in 401 k over 4 years? Since your over 50 are you maxing contributions plus cach up contributions? You should be able to max out at almost 25 k a year for you alone. If you max out your 401k's then you AGI should be low enough to max out both Roth's.

The spouse needs 7 years of ACA coverage when they retire..I wouldn't max out those 401's IMO I'd work on getting together enough after tax money to ensure they stay under the cliff for her insurance...

As a side comment the budget looks good and includes a 100 bucks a week for eating out, so the even the bare bones isn't that restrictive.

OP when you retire your car needs might change and the two leases payment or the 6,600 you are paying annually could be lowered. I notice you have the exact same expenses for both cars not likely that would happen if neither of you is driving to work.

 

[downrod]

The spouse needs 7 years of ACA coverage when they retire..I wouldn't max out those 401's IMO I'd work on getting together enough after tax money to ensure they stay under the cliff for her insurance...

As a side comment the budget looks good and includes a 100 bucks a week for eating out, so the even the bare bones isn't that restrictive.

OP when you retire your car needs might change and the two leases payment or the 6,600 you are paying annually could be lowered. I notice you have the exact same expenses for both cars not likely that would happen if neither of you is driving to work.

I was wondering about that. I am still gathering info about ACA, but I was wondering if it made more sense to prioritize after tax savings to draw on, to reduce taxable income for 7 yrs.

As far as the cars go, I was just throwing in a budgetary figure. We have never leased. Typically we buy our cars outright and keep them for 7-10 yrs.
My guess is that my wife will be ready for a new vehicle around our retirement date, we will probably buy her a new vehicle, and I will take over her existing vehicle. I always get the hand me downs, and I am just fine with that. I didnt really know how to budget in a large expense every 7-10 yrs into the plan, so I factored in a monthly lease cost.

Thanks for the input!

 

[Scusan]

Welcome. We're "just down the road a piece" off M-59. Within a year or two age wise and just starting into the snowbird thing as we figure out how much longer to stay employed.

I'm not sure I have anything to add, but I definitely learned from your work and the comments.

Thanks for posting, I will be going through very similar calculations, probably when I get more time at the end of the summer and it was beneficial to follow through your thought process.

If I did the math correctly, this is the week you'll find out how things are going with your job and the cutbacks. I wish you luck. My father got shown the door at 57 or 58. He wasn't happy about it at the time, but as we both look back on it now (he's 88), it was one of the best things that happened to him in life. As one door closes, another opens.

 

[Teacher Terry]

With SS covering your essential expenses and savings you look good to go.

 

[Stonewalker]

This community is awesome! So much great information!

+1 This community really is awesome. You're very wise to come to them BEFORE retiring and getting advice.

I just get to read about the things I should have done better...

 

[RetMD21]

My wife and I make good incomes for the area that we live in. My income is approx. 110 K, My wife’s income is approx. 116 K. My job is not secure. As a matter of fact, there is a large cut coming next week and I do not know if I will survive the cut. My wife’s job is much more secure.
...
Vanguard Advisor fee – 0.3% on approx. 550K - $1650 annually
(Thinking about dropping this and proceeding on my own.)

.

I hope you survived the cut! We are fortunate to have just 4.5% state tax in Mich. As others have pointed out if you can save more including in non-tax advantaged accounts that would be great. I wonder if Vanguard is helping enough to justify the fee.

 

[2177V]

My 2 cents........I suggest reading the following link:

https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html

The above link indicates that worst bear market and recovery time since WW2 is 7-1/2 years or 90 months. Do you have a rainy day fund that can last that long?

The second link on bonds during a crash is as follows:

https://obliviousinvestor.com/what-happens-to-bonds-in-a-stock-market-crash/

The above link shows that some bonds can decline in a stock market crash...except for Government Bonds.

In general, most bonds do not decline as much as stock. However, certain bonds do decline and bonds can give you a sense of false security if you do not select the right type of bonds.

In general, Short term bonds are less risky than intermediate and long term bonds.

Total market bond funds co-mingle of short term, intermediate and long term bonds, government bonds, corporate bonds so a total bond fund may not perform as well as a short term government fund in a crash. In the long term, a total bond fund perform better than short term government fund but I don't believe that you can have both. (Safety during a crash and good long term performance)

You must feel comfortable with your portfolio having a sufficient safety net during a crash or bear market. Otherwise, you may have a hard landing.

I am retired and I have 7-1/2 years in liquidity consisting of short term government fund, short term corporate funds, money market funds and CDs. This is my safety net. The rest of my portfolio are in stock investment because of my safety net. If you have SS or other reliable income you can adjust your safety net accordingly.

 

[NXR7]

The massive trap with ACA is that no state other than Florida (I think) mandates that the offered coverage works outside of the area or state where you live. Apparently the loss of nationwide coverage started around 2016. We live in Ohio and I had to stop working a year before I'm Medicare-eligible. My wife is also five years younger than me.

For NE Ohio we only had ACA choices for NE Ohio coverage. Period. We went to a couple of health care brokers and they both confirmed that. The only out-of-network coverage we would have with ACA is if it were a life-threatening injury or illness.

We're going with United Healthcare 360-day short-term coverage to get us through this. About $850 a month for the two of us with a $2,500 per-person deductible. It does not cover prescriptions or pre-existing conditions but we have nothing of significance in either of those areas. Yet. So about $425 per person. With Medicare I would be looking at $135 + $150 for a supplement or roughly $285 a month so I don't think I'll see a significant decrease in cost with Medicare, especially since I'm on the UH Short Term Elite Plus program that covers everything after the deductible.

One thing to remember as you get within two years of Medicare is that your Medicare premium is based on your Modified Adjusted Gross Income (MAGI). If you exceed the MAGI limit then your Medicare premium goes up for that year. So for a 2019 Medicare user your MAGI for 2017 usually determines your 2019 premium. You can push your MAGI past the no-surcharge limit by having too much in pre-tax withdrawals. I think it's $170,000 for joint filers for this year.

Ray

 

[jIMOh]

I hope you survived the cut! We are fortunate to have just 4.5% state tax in Mich. As others have pointed out if you can save more including in non-tax advantaged accounts that would be great. I wonder if Vanguard is helping enough to justify the fee.

If it was black Tuesday, it affected senior leaders more than salaried engineers like me... I look forward to knowing if Downrod is still employed. It was only 500 (ONLY!) this week, but 5% were cut since year began.

 

[Sunset]

We live on the lake. they are huge and they are everywhere! I have the exterior sprayed once per month from May to October

I use a pellet gun, or gas sprayed out of a dish soap bottle, but only outside.

Inside, I jump on them with shoes, or pour boiling water on them if they are in the sink.

 

[downrod]

If it was black Tuesday, it affected senior leaders more than salaried engineers like me... I look forward to knowing if Downrod is still employed. It was only 500 (ONLY!) this week, but 5% were cut since year began.

Yes, I made it through the cut. Didn't see much activity at my level or in my immediate area. Whew...

 

[downrod]

I use a pellet gun, or gas sprayed out of a dish soap bottle, but only outside.

Inside, I jump on them with shoes, or pour boiling water on them if they are in the sink.

The pellet gun sounds like fun!

 

[24601NoMore]

I'm actually impressed OP can get to $40K in "essential" expenses, as our essential expenses (ie: not including healthcare coverage, taxes and travel) are roughly $20K more than that - and we buy our clothes mostly at Kohls, eat out < 2X/month and do not drive fancy cars. And that's in a MCOL area in the Midwest. But then again, I track every penny in Quicken and know what our real - not estimated or pulled off of bank statements - yearly expenses are..

 

[Golden sunsets]

I think you look golden. Congrats on surviving the RIF. You have been overly conservative in your estimates of spending, but that is a great way of ensuring that you will be fine in the drawdown phase.

I think there is a tab for lumpy expenses in Firecalc, so if you wish to recalculate your budget, with purchases periodically, rather than the lease method, using that tab for periodic lumpy expenses, would enable you to do that and recalculate your success rate. Also at some point, later in retirement, you may drop down to one vehicle. If it were me, I would replace one or both cars, before retirement, so that your first auto "withdrawal" is put off for several years. Same goes for other one time expenses, for your condo. Also, Note there may well be occasional special assessments, for things like new roof, exterior painting, road resurfacing, etc., especially living on a lake, where there may be extra wear and tear or water front amenities.

Also, I think that the suggestion to bulk out on After Tax accounts in the next four years is a good one. Either that or if your 401K has a Roth version, you could designate some portion of your and your DW's 401K contributions to be Roth rather than Qualified contributions. Beware though of the 5 year rule on W/D from Roths.