Hi,
I just introduced myself over on the "Hi, I am" board: http://www.early-retirement.org/forums/f26/our-30-30-plan-targeting-er-at-age-55-intro-65687.html#post1296632. But I'd also like to ask a more detailed request for an overall ER plan review here.
We’ve put a lot of effort into trying to set ourselves up for ER and balancing that with raising our family. I recently did a free financial plan with Vanguard and they think we have an 83% chance of not outliving our money. Firecalc thinks we’re at 100%.
My employer will reimburse me for $500 of financial planning now that I’m 50. I plan to do this within the next year or two. In the meantime, I’ve already learned a lot the past few months reading at Bogleheads and more recently, here. But rather than heading into a financial planner and having to pay by the hour to be learning terms and tactics for the first time, I’d like to have tested our strategy a bit with an experienced community of others who’ve been down this path.
At this time, I guess I’m looking for input on any areas we’ve missed, any items we should be focusing on when we meet with a planner, any hidden “gotchas”. So I apologize in advance for the length of this post; but for the past several months now, I just have a lot of variables swirling around in my head. I’d like to get some confirmation or tips for improving our plan so that I can put this to rest awhile, as we work towards ER in 5 years.
So here goes, either grab another drink and kick back or hit the back button on your browser. You’ve been warned.
We live in the Northeast and plan to stay here when retired too, as long as our kids end up here too. We might consider renting a few months some winters though, likely in FL or SC or similar areas.
Careers & Income
We are both fortunate to have had very stable careers. I’ve only had one job at one employer since graduating from college; current salary is $105k, but with great benefits, including 6 weeks of vacation. I know that one employer might sound nauseating to some folks. But I’m an IT Architect at a very stable private insurance company and the nature of IT is that the technology changes enough to keep things challenging and fun. I’ve gone from Assembler language programming, through COBOL, C++, and mostly Java now. And that’s just the programming languages. From green screen terminals to PCs to internet and mobile, it keeps evolving and I’m right in the thick of it. So it’s been fun and still is. My wife is a foreign language teacher at one of our city’s junior high schools, but spent her first decade teaching at a high school (and not paying into SS back then). She still enjoys teaching too; current salary is $81k and obviously the usual extensive vacation time. Even though we both still enjoy our work, we don’t feel defined by it.
Pensions, Social Security & Health Insurance (Oh my!)
My employer is a rare breed that still provides a free non-COLA DB pension at retirement age 55 that will work out to around 60% of my highest 3-year salary average, with a free 60% survivor benefit that I can buy up to 100% for 6% of my benefit. They also 100% match the first 6% of my 401k. And they cover 80% of health insurance, and will continue to provide me access to that group plan from my ER age 55 until Medicare, at which point they still provide access to group Medicare supplemental plans.
My wife’s retirement age is a bit up in the air as of now, due to state pension overhaul a year or so ago, which pushed her retirement age from age 52 to 59, as well as some other changes. However, with this now in court between her union and the state, I suspect there could be some compromise that might yield an age somewhere closer to 54 or 55 for longtime employees. We shall see. If so, her pension will be around 56% of her final 3 years’ salary; if she really does have to work til 59, it’ll be higher, as would mine, seeing I’d probably continue working too – but we’re really hoping to still be able to both retire in mid-50s. Hers has a slight chance of COLA every 5 years or if/when the pension’s funding increases substantially (not holding breath). Her survivor benefits are more costly than mine: 10% gets me 50%, and 18% gets me 100%.
The bottom line is that our pensions will provide $100k/year. In retirement we’ll no longer be saving for retirement or paying SS taxes, plus no more college bills. And boomerang kids aside, no more other child expenses like auto insurance, cell phones, etc. Given that pretax income, we'd have about $75k/year spending money and we feel that we can live on this amount without our lifestyle changing. Of course, without COLAs, we’ll likely need to withdraw enough each year from our portfolio to offset the effects of inflation on our pensions. But our goal would be to delay SS benefits until age 70 (or maybe wife taking spousal at 67, but me suspending?). By that time, our $100k pensions would have deflated to more like mid-60s; but then our SS benefits, from what I can tell with their anyPIA software (accounting for 10 years of WEP effect on my wife’s prior school system) would add back in around 48k/year, putting us back up to where we started retirement or better.
Expenses & Debt
Our daughter will graduate college this summer from our State U, where she’s enjoyed living too, and will have completed her bachelor’s degree in just 3 years. Though we never qualified for any financial aid, our costs were quite low for her degree, so we managed to pay as we went each month, without incurring any student loans. This was always our plan for college, so we paid down our mortgage for many years and funded 10% into retirement accounts in lieu of saving for college. Thankfully, both of our kids chose the state school over more expensive privates (at which we’d have asked them to take on some loans to cover the difference). Our son is in his freshman year, also at our State U. It was a bit tight this past year with both of them in school, but we still managed to cover costs without debt. Now we’ll only have his college costs for 3 more years, which we can continue paying from our income.
We have no other debt, and our cars are less than 7 and 5 years old. And we usually drive our cars a good 10 years, so we don’t anticipate new ones soon. We set aside money each month though to build up a down payment for our next purchases, so that we usually put down 50-60% and only have to finance for 3 years.
Assets
We managed to pay off our mortgage about a year ago and our home is worth around $350k; plus we have the possibility of splitting our lot into another sellable lot, and either building a new home for us or yielding another $75-100k if we decide to relocate (though we intend to stay in our current state).
Our current retirement portfolio is ~$628k. Now that we only have one child left in college and I’m 50, we’re going to increase our 10% contributions to $23k for me, and keep wife’s for now at ~10% ($8500). Adding in my employer’s match, we’ll be saving close to $38k/yr for the next 5 years before retirement. Obviously, without a crystal ball, I can’t say for sure what our portfolio balance will be then, but I’m estimating around $1 million.
Our current asset allocation is roughly 80:20 stocks:bonds. With my catch-up contributions now, we’ll be sliding towards 70:30. I know this is a bit aggressive, but we’ve never panicked and sold during downtimes. Plus with our pensions, I feel like we can withstand a bit more risk.
Funds:
Vanguard Total Stock Mkt Idx Inst (VITSX) 35%
Vanguard Total Bond Market Index Fund Institutional Shares (VBTIX) 15%
Fidelity Low-Priced Stock Fund (FLPSX) 12%
Fidelity Diversified International Fund (FDIVX) 10%
Vanguard Total International Stock Index Fund Institutional Shares (VTSNX) 10%
Fidelity New Millennium Fund (FMILX) 8%
Fidelity Capital & Income Fund (FAGIX) 5%
Spartan500 Index Fund - Fidelity Advantage Class (FUSVX) 5%
Total 100%
We also have sufficient emergency funds.
Life and Long-term Care Insurance
I haven’t started really learning much about long-term care insurance, but that’s on my to-do list. I currently have free life insurance of 5x annual salary from employer group plan, and we have a term policy for my wife for ~$330k for a few more years. Our goal has always been to stop buying life insurance once we’re no longer insuring against lost income potential.
So as Forrest Gump said, “That’s about all I have to say about that”. If you’ve endured it this long, I thank you and would appreciate any words of wisdom – positive or constructive suggestions for improvement.
Thank you very much. I’m so glad I found this site (and bogleheads)!
I just introduced myself over on the "Hi, I am" board: http://www.early-retirement.org/forums/f26/our-30-30-plan-targeting-er-at-age-55-intro-65687.html#post1296632. But I'd also like to ask a more detailed request for an overall ER plan review here.
We’ve put a lot of effort into trying to set ourselves up for ER and balancing that with raising our family. I recently did a free financial plan with Vanguard and they think we have an 83% chance of not outliving our money. Firecalc thinks we’re at 100%.
My employer will reimburse me for $500 of financial planning now that I’m 50. I plan to do this within the next year or two. In the meantime, I’ve already learned a lot the past few months reading at Bogleheads and more recently, here. But rather than heading into a financial planner and having to pay by the hour to be learning terms and tactics for the first time, I’d like to have tested our strategy a bit with an experienced community of others who’ve been down this path.
At this time, I guess I’m looking for input on any areas we’ve missed, any items we should be focusing on when we meet with a planner, any hidden “gotchas”. So I apologize in advance for the length of this post; but for the past several months now, I just have a lot of variables swirling around in my head. I’d like to get some confirmation or tips for improving our plan so that I can put this to rest awhile, as we work towards ER in 5 years.
So here goes, either grab another drink and kick back or hit the back button on your browser. You’ve been warned.
We live in the Northeast and plan to stay here when retired too, as long as our kids end up here too. We might consider renting a few months some winters though, likely in FL or SC or similar areas.
Careers & Income
We are both fortunate to have had very stable careers. I’ve only had one job at one employer since graduating from college; current salary is $105k, but with great benefits, including 6 weeks of vacation. I know that one employer might sound nauseating to some folks. But I’m an IT Architect at a very stable private insurance company and the nature of IT is that the technology changes enough to keep things challenging and fun. I’ve gone from Assembler language programming, through COBOL, C++, and mostly Java now. And that’s just the programming languages. From green screen terminals to PCs to internet and mobile, it keeps evolving and I’m right in the thick of it. So it’s been fun and still is. My wife is a foreign language teacher at one of our city’s junior high schools, but spent her first decade teaching at a high school (and not paying into SS back then). She still enjoys teaching too; current salary is $81k and obviously the usual extensive vacation time. Even though we both still enjoy our work, we don’t feel defined by it.
Pensions, Social Security & Health Insurance (Oh my!
)My employer is a rare breed that still provides a free non-COLA DB pension at retirement age 55 that will work out to around 60% of my highest 3-year salary average, with a free 60% survivor benefit that I can buy up to 100% for 6% of my benefit. They also 100% match the first 6% of my 401k. And they cover 80% of health insurance, and will continue to provide me access to that group plan from my ER age 55 until Medicare, at which point they still provide access to group Medicare supplemental plans.
My wife’s retirement age is a bit up in the air as of now, due to state pension overhaul a year or so ago, which pushed her retirement age from age 52 to 59, as well as some other changes. However, with this now in court between her union and the state, I suspect there could be some compromise that might yield an age somewhere closer to 54 or 55 for longtime employees. We shall see. If so, her pension will be around 56% of her final 3 years’ salary; if she really does have to work til 59, it’ll be higher, as would mine, seeing I’d probably continue working too – but we’re really hoping to still be able to both retire in mid-50s. Hers has a slight chance of COLA every 5 years or if/when the pension’s funding increases substantially (not holding breath). Her survivor benefits are more costly than mine: 10% gets me 50%, and 18% gets me 100%.
The bottom line is that our pensions will provide $100k/year. In retirement we’ll no longer be saving for retirement or paying SS taxes, plus no more college bills. And boomerang kids aside, no more other child expenses like auto insurance, cell phones, etc. Given that pretax income, we'd have about $75k/year spending money and we feel that we can live on this amount without our lifestyle changing. Of course, without COLAs, we’ll likely need to withdraw enough each year from our portfolio to offset the effects of inflation on our pensions. But our goal would be to delay SS benefits until age 70 (or maybe wife taking spousal at 67, but me suspending?). By that time, our $100k pensions would have deflated to more like mid-60s; but then our SS benefits, from what I can tell with their anyPIA software (accounting for 10 years of WEP effect on my wife’s prior school system) would add back in around 48k/year, putting us back up to where we started retirement or better.
Expenses & Debt
Our daughter will graduate college this summer from our State U, where she’s enjoyed living too, and will have completed her bachelor’s degree in just 3 years. Though we never qualified for any financial aid, our costs were quite low for her degree, so we managed to pay as we went each month, without incurring any student loans. This was always our plan for college, so we paid down our mortgage for many years and funded 10% into retirement accounts in lieu of saving for college. Thankfully, both of our kids chose the state school over more expensive privates (at which we’d have asked them to take on some loans to cover the difference). Our son is in his freshman year, also at our State U. It was a bit tight this past year with both of them in school, but we still managed to cover costs without debt. Now we’ll only have his college costs for 3 more years, which we can continue paying from our income.
We have no other debt, and our cars are less than 7 and 5 years old. And we usually drive our cars a good 10 years, so we don’t anticipate new ones soon. We set aside money each month though to build up a down payment for our next purchases, so that we usually put down 50-60% and only have to finance for 3 years.
Assets
We managed to pay off our mortgage about a year ago and our home is worth around $350k; plus we have the possibility of splitting our lot into another sellable lot, and either building a new home for us or yielding another $75-100k if we decide to relocate (though we intend to stay in our current state).
Our current retirement portfolio is ~$628k. Now that we only have one child left in college and I’m 50, we’re going to increase our 10% contributions to $23k for me, and keep wife’s for now at ~10% ($8500). Adding in my employer’s match, we’ll be saving close to $38k/yr for the next 5 years before retirement. Obviously, without a crystal ball, I can’t say for sure what our portfolio balance will be then, but I’m estimating around $1 million.
Our current asset allocation is roughly 80:20 stocks:bonds. With my catch-up contributions now, we’ll be sliding towards 70:30. I know this is a bit aggressive, but we’ve never panicked and sold during downtimes. Plus with our pensions, I feel like we can withstand a bit more risk.
Funds:
Vanguard Total Stock Mkt Idx Inst (VITSX) 35%
Vanguard Total Bond Market Index Fund Institutional Shares (VBTIX) 15%
Fidelity Low-Priced Stock Fund (FLPSX) 12%
Fidelity Diversified International Fund (FDIVX) 10%
Vanguard Total International Stock Index Fund Institutional Shares (VTSNX) 10%
Fidelity New Millennium Fund (FMILX) 8%
Fidelity Capital & Income Fund (FAGIX) 5%
Spartan500 Index Fund - Fidelity Advantage Class (FUSVX) 5%
Total 100%
We also have sufficient emergency funds.
Life and Long-term Care Insurance
I haven’t started really learning much about long-term care insurance, but that’s on my to-do list. I currently have free life insurance of 5x annual salary from employer group plan, and we have a term policy for my wife for ~$330k for a few more years. Our goal has always been to stop buying life insurance once we’re no longer insuring against lost income potential.
So as Forrest Gump said, “That’s about all I have to say about that”.
If you’ve endured it this long, I thank you and would appreciate any words of wisdom – positive or constructive suggestions for improvement.Thank you very much. I’m so glad I found this site (and bogleheads)!
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