Is this simple plan ok??


Confused about dryer sheets
Apr 28, 2008
Age: 35
Goal: retire by 65.
Income: 150k (me), 50K (DW)

I have put together the following basic plan. I am uninformed on financial matters and frankly not interested in learning about stock picking, optimizing my asset allocation etc. I am not necessarily concerned with if the following plan is best (ie most tax efficient, best "efficient frontier"), just that it is acceptable (ie will get the job done).

Here is the plan:

1. Save 20% of my gross salary automatically into two accounts: a 401K with Merrill Lynch (max contribution) and a taxable account with Vanguard.

2. The Vanguard money will be put into TR2040. The Merrill Lynch money will be put into 3 funds (10% PTRAX, 18% RERFX, and 72% MASRX) to approximate the TR2040 fund.

3. Retire in 30 years, will roll over everything into TR2040 fund, which should have a yield of about 4 % by then. We will live on this and my wife's COLA pension (which should replace her whole salary by then).

By my calculations, if I earn a 7% return of my money, in thirty years my nestegg will be more than 25 times my required investment income adjusted for inflation.
Well, you're putting conditions on the replies, so you'll get conditional responses.

Your strategy strikes me as reasonable if you believe in target funds as your sole investment vehicle. There are worse strategies and IMHO there are better ones.

But you asked if it would "get the job done" and be "acceptable" which I don't think anyone can answer for you. That COLA pension down the road (assuming it materializes) will cover a lot of investing missteps.
Looks good, only thing is why wait until 65? You could well be dead by then.
Looks good, only thing is why wait until 65? You could well be dead by then.

Your plan will work.
Why only saving 20% of Gross?
-40 savings
-60 taxes
100K all other spending/year

How much do you think you will spend at age 65 in today's dollars?
What do you estimate you total net worth will be at age 65 in today's dollars?
Thank you for the fast replies

The savings will be 20% of my gross salary (30,000). By my calculations, this is enough savings to replace my salary in 30 years. My wifes salary will be replaced with a COLA pension, therefore I do not include it is savings calculations. We have a lot of disposable income (about half our takehome pay), and we are not big spenders. So we usually save an extra 1000-3000 a month on top of the 30k.

So, it is my hope to advance that retirement date up a bit by saving extra. The 20% savings is my baseline minimum to insure that I can retire at 65 at the latest, if all else fails.

Overall, I felt good about the plan. I just wanted to make sure I was not doing anything incredibly stupid.

Overall, I felt good about the plan. I just wanted to make sure I was not doing anything incredibly stupid.Carl
Carl, trying to get these guys to say yes or no without tinkering is really not very easy. But you seem to have done that, more or less. :)

My only concern would be counting on those pensions in 30 years. I doubt you are military with that income, but even if you are gov't I doubt things will be the same in 30 years. With private industry killing those pension critters off as fast as they can find them, I suspect gov't will follow along in a couple decades. At least tinkering with them. And if you are private industry I would be willing to bet the mortgage that things will change on you. And that's assuming you stay in the same job for all those years, which is really rare these days too.

Therefore, in keeping with what Dex was saying, I would plan on saving enough to retire on all by my lonesome. Then, in 20-25 years if you still have a pension, you can get out early if you want to. Just MHO, as a private individual who watched his pension "guarantees" erode over a few decades, and got out just as they were doing away with it.
Sounds more than adequate to me. I'm sure if you run it through firecalc it will give you a more detailed answer.
Looks good to me, anyone saving 20% of their income for 30 years should have no issues. A few things that may run you off the track:
1) children
2) Medical issues
3) Legal issues
4) Divorce
5) Job losses
6) Lack of proper insurance (such as disability, executive umbrella, etc.)

Good luck!
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