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Looking for some advice. I am 39 and my wife is 34. I make about $130k a year and my wife about $30k. We have no children and don't plan on having any. We have mortgage in which we owe about $350k @4%. We are only 5 years into it. I currently have a 401k with about $160k in it and a Roth IRA with about 10K and about 10K liquid savings? MY wife just started this job(Cablevision) about a year ago and she contributes very little to the 401k( they match) but she is going to increase it. I am sure we are a bit behind in the savings/investments area if we are looking to retire at 55 and most would say we have no chance but this is why I am writing this. I know a big concern might be health insurance but it just came to me that if I retire at 55 and she is still working for another 5-6 years I may be able to go on her health plan but then again I might want her to retire when I do(at 55). Looking for a some advice as to what changes I/we should make now etc. Thanks very much.

Wow I just read what I wrote and it is almost laughable thinking I can retire at 55. But you know what it's REALLY sad that most people work from the age of about 15 until say 65-70 then retire and have health issues and/or only enjoy 5-10 years of not working before you meet your maker. Thanks
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First of all.....you owe $350K on a mortgage? My god man, WHY?
You have no kids. Why do you need so much house? Sell it. Buy some humble little place you can get for the change in the bottom of your wife's purse. It will be cheaper to heat and cool and you will be just as snug and happy there. Trust me. I've done it both ways. Put the rest of the money to work for you.

Buy second- (or third-) hand cars. Don't be a fashionista (whatever that is).

You are making good money. Handle it right and you actually could retire quite early.

AM
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Thanks a lot AM!! Yeah, the house things uggghhh....and it dropped in value to about $300k. It is a legal two family, we are renting the downstairs and live on the 2nd floor.
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A huge portion of the Retirement planning/planners are based on various rules - retirement spending is x% of pre-retirement, withdraw Y% from your portfolio, you should have a percentage of bonds equal to your age -- and the list goes on.

Clearly these rules have some basis or else they would have disappeared with the Flat Earth Society. But I really think apply these rules needs be at the end of a process, not at the start.

The first thing a person facing (planned or otherwise) not working needs to know is what am I spending money on. There are some expenses that not uniform from month to month - say property insurance. Some are seasonal - heating/cooling costs. Some are pretty hard to change - medical insurance as an example. Some can be adjusted (food expense). Some will end (savings for retirement). If you don't know how much these expenses are, you can't possibly know what your retirement spending will be at your current standard if living in retirement.

I am a strong believer in Quicken - but other products exist. In my view it takes certainly over a year of data to estimate spending. How much does your insurance premiums change from year to year? What is the rate of return on your current portfolio - damn few people can ever retire without some portfolio income during retirement. Too many people (in my view) feel they cannot invest in stocks - they want CDs or bonds. Well after they pay taxes on the income from these conservative investments do they have even enough left over to cover inflation?

These are just some of the questions that you can answer with a few years worth of financial data - if you want.

Just a reminder -- at age 55 if you are an average American male you have and a life expectancy of 25 years. Female almost 29 years. That means half the 55 year old women will live beyond age 84 - some a lot longer. My wife and I both retired at age 55 and we are planning our financial future on the assumption my wife who is younger will live to at least age 95. A lot of things can change in 40 years.
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Do you have a full financial plan with written goals agreed upon by both of you ?

It's not that difficult for you to retire at 55 if it's what you both want. Since you make the bulk of the income, how's your life insurance ? How about disability insurance ? Have you(the two of you) considered and investment in education for your wife to increase her income ?

But you know what it's REALLY sad that most people work from the age of about 15 until say 65-70 then retire and have health issues and/or only enjoy 5-10 years of not working before you meet your maker.

Broad brush there. Take care of your health now and the benefits could continue. Also, consider some people do enjoy their work and choose to continue it in one form or another for a long time.
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I retired at 53.

If you truly want to retire early, the main need is to save, save, save. And then invest wisely.

So for example, that $160K lifestyle requires a minimum of $4MM in investable assets at retirement (using the 4% rule and not considering inflation). That $4MM comes from savings plus investing your funds wisely.

But keep in mind, several things change when you retire. One is that you no longer need to save as much and you don't pay income taxes on those funds. Plus adjusting your lifestyle to reduce spending and increase saving pays multiple dividends. It reduces your living expense that you need to fund in retirement (reducing that $4MM), plus you can save and invest the money saved, and you have the investment gain from those savings. Of course, you can also downsize when you retire and move some place with lower living expenses.

Yes, you will have several options for health insurance when you retire, but who knows how things will change between now and then. I would not worry about it too much, but rather concentrate on save, save, save and invest those funds wisely. If you are a budding landlord, real estate can be a good investment. And it can provide income in retirement. That too can be something to consider.
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Thanks a lot AM!! Yeah, the house things uggghhh....and it dropped in value to about $300k. It is a legal two family, we are renting the downstairs and live on the 2nd floor.

--------


At least you have some money helping with a mortgage you wouldn't need at all if you lived less large. I can't really speak to owning rental property since a landlord is one of the last things I ever want to be. You still have all the expenses and maintenance (and headaches) of a house that is way more than you need.

You make a good deal of money between the two of you. And remember that it's how much you keep that is really important.

I knew a couple once who both worked in the tech industry when computers were just getting their legs, so to speak. While others were trying to buy the best houses they could afford, that couple was renting a TINY little place, furnished. They were saving a TON of money.

You can't change very much what you earn, but you can make major changes in what you keep. And when others are still buried in bills and mortgages and worried about being laid off in their 50s, you could be sitting pretty - all because you were willing to make MAJOR sacrifices today.

Not saying it's easy to watch while your friends live in nice homes while you live in a tiny place they might call a shack. But later it won't be easy for them to watch while you are cruising around the world and they are buried in debt.

Just sayin'

AM
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You've already received some good thoughts. I'll just re-enforce a few things.

You definitely need to know where you're spending you money. If you have no idea of what your needs (utilities, food, mortgage) and wants (travel, clothes, dinning out) are then you can't even begin to plan. Use Quicken or something to keep track of things. At a minimum you need a year's data, 3 is better.

Save, save, save. If your 401k's have matches, put in what gives you the max match. Max out IRAs. If money left over, can be a toss up about paying down the mortgage vs. regular brokerage account. Plus side: after mortgage is paid, the rent money is all yours. Debt free is good heading into retirement. Down side: tying up money in an illiquid asset and you could potentially do better than a 4% return with good dividend paying stocks.

JLC
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Save, save, save.

Balance, balance, balance. My father died when he was 59 and my mother was 56. My husband died when he was 59 and I was 56.
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So for example, that $160K lifestyle requires a minimum of $4MM in investable assets at retirement (using the 4% rule and not considering inflation).

I know it's just an example but once you take out the savings/investing and look at the taxes on what's left, it can be amazing how much less is needed for the same lifestyle. This is speaking from my own experience with a huge drop in income.
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Wouldn't you have the same taxes if your retirement income matched your pre-retirement income??
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Wouldn't you have the same taxes if your retirement income matched your pre-retirement income??

Not necessarily because it depends where that retirement income comes from. For instance, if it all comes from tax-deferred accounts like a 401k or IRA, then you will have to pay ordinary taxes on it, and so it will be about the same as pre-retirement.

But some folks, me included, have a lot of retirement savings in taxable accounts, and so anything that comes out of selling stock from those accounts is taxed at more favorable capital gains rates.
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What she said and

If you had exactly the same income and were no longer deferring some of it for retirement, taxes wouldn't be the same. There will also be the difference in FICA if it's unearned income.

This is why it's worth digging beyond simplistic calculators, IMHO.
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I pretty much agree with the previous general recommendations of getting into the habit of saving, but also the habit of not spending excessively and in particular, never carrying short term (credit card) debt. Using credit cards is fine (and convenient), but if you can't pay the CC bill at the end of the month, don't use the credit card(s).

A quick run on your numbers (this is only an estimate based on reasonable assumptions):

$160,000 current household gross income.
75% income replacement at 55
$120,000 income requirement (today's dollars)
Annual average wage inflation of 3%
$192,500 income requirement at age 55 growing by 3%/yr over life expectancy
Assume average annual investment rate of return of 7% and annual average inflation rate of 3%, for an annual average real (inflation adjusted) rate of return of 3.88%
Currently $170,000 saved towards retirement
Assume 35 years in retirement (to age 90)
$3,800,000 (rounded) required at age 55
$118,000 required annual savings rate beginning this year

This is a linear calc, and like all linear calcs will not take into account sudden changes, such as you retiring at 55 and wife working another 5 years. To take this into account, I use the uneven cash flow function (Excel XIRR) of my financial calculator, which tells me....if I input the numbers correctly.... that if your wife works another 5 years, you'd need to save at the annual rate of $111,250 for 16 years.

The one other factor not considered here is Social Security. Yes, I know, some say it won't be there for you younger folks....but I say we've been here before with a SS crisis and Congress changed the FICA rate and other stuff to extend its life, and I suspect they'll do it again unless, I suppose, Congresspersons don't value their good health and don't object to being hanged in public....I know, BIG assumption....but for now, lets say they do. If you have a SS PIA of $2,200/mo at 67 and wife has a PIA of $1,400/mo at 67 and you both begin at the earliest age of 62, with you beginning 5 years before she, using the same uneven cash flow function, the annual savings requirement drops to $81,300.

Again, this is only an estimate based on assumptions....but it should give you an idea of the savings requirement you have ahead of you to be able to retire at 55.

BruceM
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$160,000 current household gross income.
75% income replacement at 55


Use a spreadsheet or a crayon and napkin to determine what your income requirements are in retirement. Using 75% may or may not be representative of what a person needs. Looking at my own needs, I may need only about 25% of current income.
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Thanks GW, much appreciate. BTW- My job is a union job where I will have a pension. Obviously it gets whacked by a certain % depending how early you retire. Full pension is 6o yrs old.
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Thanks RAD. We really need to get with a financial planner. I hear you regarding the work thing. I actually enjoy what I do although I would rather work for myself doing it.....maybe in retirement.
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Looking at my own needs, I may need only about 25% of current income.


Exactly. And that is FAR more realistic than 75% of current income.

AM
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Thanks JLC
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So sorry to hear that
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I make $130k....have $160k in 401k
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Wouldn't you have the same taxes if your retirement income matched your pre-retirement income??

At a bare minimum, your taxes would go down by the roughly 7.5% you pay into social security and medicare.

Plus once you retire you don't need to continue saving for retirement. That's another 10% to 30% (or more) of your pre-retirement income you don't need after you retire. If any of that was after-tax savings (Roth IRAs or just plain-vanilla savings/investment accounts), your taxes would also go down after retirement.

--Peter
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Thank Bruce. I have to save either $118k or $111k to retire early.....impossible. $3.8 needed at age 55. Even a darstic reduction in those numbers would be almost impossible to meet
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Don't give up. Whatever you save will be that much more that you have working for you and growing so that you will still have a nice nest egg at retirement time. And since you do have a pension, that will provide a nice part of your retirement income where those of us without pensions have to provide all our retirement income, so this is a good thing for you.

I don't recall if you said it, but there are lots of things you can be doing. Living within your means is paramount, and so I recommend not having any debt whether that is credit card debt or car loans. If you can avoid borrowing, then all your money is working for you.

Keep saving in both your tax-deferred and taxable accounts, and add any raises you get along the way to it. If you can just live on your paycheck, then you can also bank all of your wife's and that will help to save that much faster.

At this point, see if you can figure out a reasonable annual income that you would need in retirement based on your current expenses, and use 25x that as your general target. As you get closer, refine that budget, and your savings goal will also be refined.

As has been pointed out, don't forget that the L in LBYM stands for living, so make sure you enjoy life along the way and don't just focus on that end goal. I've seen the suggestion to get a less expensive house, but if that is part of your L, then I don't see the need to trade that now, but that is your decision based on your goals and priorities.

I've done quite a few things that other people would not have done, and have not done things that quite a few other people do, and yet I'm happy with our progress in our financial life and happy with the balance that has been struck.

Keep reading, saving, and posting, and I think you will surprise yourself at how well you can do, and if it means that you can't retire at 55, but you can retire at 58 or 60, you'll still be ahead.
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A few thoughts:
*) Someone else's opinion of the size/price of your house is something that you should pay no attention to.
*) Hopefully you have a *smart* (financially) mortgage. 30 yr FRM that you refi'ed into when the rates were near 4%. And you do NOT make extra principal payments.
*) If you *are* making extra principal payments, you need to drop what you're doing and find out why that's a bad thing if you plan to be FIRE'd (Financially Independent, Retired Early).

*) You cannot "save" yourself into becoming a millionaire. You can, however, *invest* your way to millionaire status. At a minimum, put enough into your 401K's to capture the entire employer match.
*) There's nothing wrong with having a big mortgage in retirement -- as long as it's a "smart" mortgage. If you pay 4% while earning 8.5% (average) on your investments, then you're making a net 4.5%

*) Figure your current effective net income -- subtract out the things that you pay now that you won't after you retire. FICA, 401K contribution, income tax, etc. If you are maxing out your IRAs and 401Ks, that's a few 10's of thousands of dollars of outflow that will disappear at retirement. Your income taxes will go down a lot, too.

*) I echo what RAD said. Moreover: Wouldn't you have the same taxes if your retirement income matched your pre-retirement income??
No. Not at all. Working income is all taxable. Retirement "income" isn't. A lot of it is return of principal, which isn't taxed at all. Most of the rest is LTCG, which is lightly taxed. And if you manage to stay in the 15% bracket (which isn't hard when you are retired) -- both LTCG or dividends is 0% taxed.

*) We really need to get with a financial planner.
The *only* advice you should get from a F.A. is "Keep doing what you are doing -- you don't need me."
If they say anything else, that's de-facto evidence that you haven't yet learned to invest successfully. And *that* is what you need to get -- educated.
In particular, do NOT buy anything or "invest" in anything that a F.A. wants to sell you.

*) make $130k....have $160k in 401k
You have your work cut out for you. That's a good start, but you're closer to the beginning than the ending.
The first $100K is the hardest.

When we had our little chat with a FA [one that we met via a "free dinner] before we retired, when we were discussing our liquid net worth [aside: After the dinner they -- very low-key, low-pressure -- set up appointments to meet one-on-one with a FA from the firm. You want to be in the category of "Oh, with that much money, your meeting will be with Mr/Mrs X, the head of the firm." If you aren't in that "[gasp, OH!]" category, you probably don't have enough to FIRE on. /aside]
she said, "And the bulk of that is in IRAs & 401K's, right?"
My wife & I looked at each other with a puzzled look, shrugged, turned to her and said, "No. You can't really put enough in IRA & 401K to get rich. Most of it is in taxable accounts."

*) When I had my "little chat" with each of my kids when they turned 21, I said to them that there is no reason that they couldn't have a $1,000,000 net worth in 25 years.

"Everything you need to know about successful trading and investing is on the web, gratis. There are no secrets. The rules of the game are known for each of the major market approaches – momentum, value, and statistical arbitrage. Most people simply lack the discipline to follow the rules." -- Ivan Hoff

*) When you retire, get out of Dodge. Move to a lower tax, lower cost-of-living state. On my last day of work, I came in, said goodbye to everybody, and they walked me out before noon. We hopped in the car and 3 hours later we were no longer Illinois citizens. (We had already sold the house a few months before.) My real-estate tax in Illinois for 2 months was more than my annual RE tax here.
The people who own my old house pay more in annual RE taxes than my total annual mortgage payment here.

*) Finding a financial advisor:
Don't. Refer to the above Ivan Hoff quote.

A poor FA will just rip you over without even a kiss. A good FA will supply the education and discipline for you that you should have for yourself. Needless to say, when somebody does something for you that you really should be doing for yourself, they will be charging you a hefty fee.
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Great advice 2Gifts. Thanks.
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Use a spreadsheet or a crayon and napkin to determine what your income requirements are in retirement. Using 75% may or may not be representative of what a person needs. Looking at my own needs, I may need only about 25% of current income.

If we could see the future or travel through time, we'd know exactly what our income replacement would be. Sure, it could be 25% of final working year household income, just as it could be 42% or 12% or 115%. But longitudinal research has shown that most will fall between 70 to 80%, where the higher the household income, generally, the lower the replacement ratio becomes and the lower the household income, the higher the replacement ratio.

http://www.aon.com/about-aon/intellectual-capital/attachment...

As one approaches the first retirement year, the actual household cash flow analysis determine the required income, not in a %, but in an actual dollar amount. The further one is from that first year, just like determining the annual funding requirement for a pension, the more one must rely on reasonable assumptions.

BruceM
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Holy sh&%...Rayvt...I feel like I owe you a fee!lol! Thanks very much for all the great info. We have a 30yr fixed mortgage at 4.5%. I actually just got a letter from My Mercer and my union saying they are now offering Roth 401k. I'm thinking I should start investing some $$ into that.
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But some folks, me included, have a lot of retirement savings in taxable accounts, and so anything that comes out of selling stock from those accounts is taxed at more favorable capital gains rates.

Don't qualified dividends (dividends from stock held more than a year) have a much lower rate as well? Big advantage if you're living off a dividend stream of income.

JLC
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You've got more going for you than Bruce accounted for in his quick and dirty analysis.

So far, I think everyone has overlooked your investment in a rental property. That will provide some part of your retirement income.

There's also the pension you mentioned that will help with retirement. And social security. While there are very reasonable considerations about how much social security might be available when you retire, I don't think it's wise to ignore it completely.

I also question the assumption of needing 75% of your pre-retirement income. Depending on your lifestyle, 50% to 60% may be a more reasonable goal. From that subtract off the pension, social security, and the net rental income. What remains is what you would need to provide for in your own savings.

That's probably going to be far less than the $4 million mentioned up thread. Dropping the retirement income from 75% to 60% of pre-retirement income would reduce the nest egg down to $3.2 million. And if the combination of Social security, your pension and the net rents provided 1/2 of your needs, that would drop the needed nest egg down to $1.6 million.

Just as an example, 75% of your current earnings is $120k. At your earning level, planning on social security benefits of $24k is not unreasonable. Add in $20k a year for a pension and $15k a year from the rents and you've got $59k of the needed $120k accounted for. That's close enough to 1/2 for planning purposes. The remaining $60k could come from a $1.5 million investment portfolio.

Drop the needed income to 2/3 of your current earnings, and the retirement income becomes $107k. Keeping the other income the same, you'd need about $48k a year, which translates into a nest egg of $1.2 million.

Now you would need a bit more to cover the gap from early retirement until you can collect social security. That's about 8 years times $24k a year - let's call it another $200k. But I think early retirement is more of a possibility than some posts up-thread might suggest.

--Peter
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*) There's nothing wrong with having a big mortgage in retirement -- as long as it's a "smart" mortgage. If you pay 4% while earning 8.5% (average) on your investments, then you're making a net 4.5%

Biggest point of contention. An equity investment return is not guaranteed, nor is it linear. Yes, if you could get a higher rate it makes sense, but equities are up one year, down the other, drastically in some cases.

So if you don't plan/allow for changes, cut things too close, you can hose yourself and your retirement dreams.

JLC
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Thanks Peter. The only problem is that our mortgage won't be paid off until I am about 65. So I do retire at 55 I will still have mortgage payments for another 10 years.
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I only have one nit to pick with Rayvt's comments: the mortgage.

I consider keeping your home fully mortgaged to be an advanced financial strategy. While it can increase the returns of a good investor, it can also clobber people who aren't good at investing and saving.

I generally prefer a more conservative approach of starting with the goal of paying off your mortgage about the time you retire. As your plan progress, if you see that you are better than average at saving and investing, you can always switch horses and keep your home fully mortgaged.

However, if you turn out to be less skilled at investing while keeping a large mortgage on your home, it's almost impossible to switch to a plan of paying that mortgage off before retirement.

--Peter
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Just keep in mind a whole lot of automobile workers and salaried GM workers also thought they had pensions and retiree health benefits. They are now living with partial payments from the Pension Benefit Guarantee Board.

(My home town is Flint, Michigan so I am perhaps more sensitive to this issue than others.)
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The only problem is that our mortgage won't be paid off until I am about 65. So I do retire at 55 I will still have mortgage payments for another 10 years.

OK. So you'd need to fund those payments for 10 years. Based on your first post, your mortgage payments are a little under $2k a month - let's call it $23k a year. So you'd need 10 times that, or another $230k in your nest egg to cover those payments. Really, a bit less than that, as there will be some earnings on the money over the 10 years you need it. Maybe closer to $200k.

--Peter
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[I]Don't qualified dividends (dividends from stock held more than a year) have a much lower rate as well?... [/I}

Dividends from qualified corporations stock are allowed the preferred capital gains rate if they are held at least 61 days. (91 days for true preferred stock if more than one year's accrual are paid in one dividend.) It should be noted that must so-called preferred securities are "Hybrid" debt instruments, not qualifying regardless of holding period.
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If we could see the future or travel through time, we'd know exactly what our income replacement would be. Sure, it could be 25% of final working year household income, just as it could be 42% or 12% or 115%. But longitudinal research has shown that most will fall between 70 to 80%, where the higher the household income, generally, the lower the replacement ratio becomes and the lower the household income, the higher the replacement ratio.

I don't live my life according to longitudinal research.

PSU
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>>>Depending on your lifestyle, 50% to 60% may be a more reasonable goal. From that subtract off the pension, social security, and the net rental income. What remains is what you would need to provide for in your own savings.<<<

I would not assume full SS benefits-given your age.
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My wife & I looked at each other with a puzzled look, shrugged, turned to her and said, "No. You can't really put enough in IRA & 401K to get rich. Most of it is in taxable accounts."

*) When I had my "little chat" with each of my kids when they turned 21, I said to them that there is no reason that they couldn't have a $1,000,000 net worth in 25 years.


Define rich.

I put your comment about rich and your little chat together to make a point. On more than one occasion, I've heard that you can't retire on IRAs an 401ks alone. This year's contribution limit for the IRA is $5500 and 401k is $17,500. That's $23,000 per person not including any matching or other employer contributions. If your kids married and both your kid and their spouse worked, there is the potential savings of $46,000 per year. At 5% return, it becomes $2.3 million. Stuffing it under the mattress gives them $1.15 million. If they don't marry or one stays home to raise kids, $23,000 per year at 5% return results in $1.15 million in 25 years. This ignores COLA increases to contribution limits.

PSU
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I would not assume full SS benefits-given your age.

My age is considerably older than the OP's age, and likely irrelevant to his concerns. ;-)

To your point, I can't disagree. But I also wouldn't assume no benefits, either.

I recall hearing that when the social security trust fund runs out of money in 15 or 20 years, the ongoing income stream of social security taxes is still enough to fund something like 2/3 or 3/4 of the currently promised benefits.

For younger folks such as the OP, assuming something along those lines would be prudent. But assuming no benefit at all might cause someone to unnecessarily delay retirement or to cut back too far on current living just to save way more money than needed for a comfortable retirement.

--Peter
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*) There's nothing wrong with having a big mortgage in retirement -- as long as it's a "smart" mortgage. If you pay 4% while earning 8.5% (average) on your investments, then you're making a net 4.5%

Biggest point of contention. An equity investment return is not guaranteed, nor is it linear. Yes, if you could get a higher rate it makes sense, but equities are up one year, down the other, drastically in some cases.


Of course. If you are on a shoe-string you're at risk to get burned. So don't retire early on a shoe-string. Simple as that.

A mortgage is a long-term non-callable loan, so as long as you can make the payments you are fine. It's when you can't make the payment that it all comes crashing down.

The spreadsheet that I posted in a different loooooong thread shows some interesting statistics for a simple B&H of the S&P500. Since 1950, the worst 20-year period had an average return of 6.2%. Worst 15 year period had 3.9%.
A 30 year mortgage is, um, 30 years. Worst case 30 year S&P return was 8.9%.
So, as long as you can make the payments, worst case is you net 8.9% - 4.5% = 4.4%. Avgerage case you net 10.7% - 4.5% = 6.2%.

Not a steady 6.2%, though. It's very lumpy and quite possible to have a string of years with a net negative return. People who understand (and can stomach) that lumpy goes along with high return end up rich. People who insist on low-volatility, non-lumpy end up not rich.
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The only problem is that our mortgage won't be paid off until I am about 65. So I do retire at 55 I will still have mortgage payments for another 10 years.

Heh. I retired at 58, got a new 30 year mortgage 9 months later, when the house was completed, and refi'd 3 times since then. My last refi won't be paid off until 2041, at which time I'll probably be long dead.
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To your point, I can't disagree. But I also wouldn't assume no benefits, either.


When I was in my earlier planning and saving phase similar to the OP, I never counted any SS benefits in my calculations to determine my savings goal for retirement. I find that to be a more conservative approach even though I do agree that there will be some SS for the OP. Since it is so far out into the future and we cannot know how SS will be handled at the time of the OP's retirement, I think erring on the conservative side makes sense.

As retirement approaches, the OP will have a much better handle on what might be available, and can adjust the plans accordingly.

I am within a few years of pulling the retirement trigger, and only just started to count SS into my calculations, which now also include a much more detailed and realistic retirement budget so that I can know my money will last.

I think it behooves the OP to consider all of this, and based on his own risk tolerance, decide how much of SS to include in his savings goal calculations, if any.
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>>>>For younger folks such as the OP, assuming something along those lines would be prudent. But assuming no benefit at all might cause someone to unnecessarily delay retirement or to cut back too far on current living just to save way more money than needed for a comfortable retirement.

--Peter<<<<



Assuming no SS benefits, irrespective of current age, like many do is really dumb.
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The spreadsheet that I posted in a different loooooong thread shows some interesting statistics for a simple B&H of the S&P500. Since 1950, the worst 20-year period had an average return of 6.2%. Worst 15 year period had 3.9%.

Just make sure you start investing and begin withdrawals at exactly the right times. ;-)
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When I was in my earlier planning and saving phase similar to the OP, I never counted any SS benefits in my calculations to determine my savings goal for retirement.

I did the same but likely for different reasons. For a few of my jobs, I was not covered by SS. There was also the issue that my husband was usually the higher earner so after 10 years of marriage, there was a different wrinkle. I actually just threw SS into the income stream mix calculation after finding out what would be available at 60, 62 and 66.

Then again, I am in a totally different place than couples but planning well for retirement only made everything else a bit easy.

I can't remember where the post is but even with good planning there would have been a surprise along the way on taxation of disability benefits so I was glad I wasn't planning down to the minimum penny.
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Then again, I am in a totally different place than couples but planning well for retirement only made everything else a bit easy.

I can't remember where the post is but even with good planning there would have been a surprise along the way on taxation of disability benefits so I was glad I wasn't planning down to the minimum penny.


That brings up another good point. As I am running the various simulations these days and have started to consider SS as part of the income stream, I've started playing with early mortality rates for both DH and me as that does have an impact on the planning as well.

As you know all too well, things change when the first spouse passes, and depending on which spouse goes first, there are differences in the SS income that also affect how much savings needs to be there.

Also, I find planning for the minimum amount to be too risky for me. I have 2 scenarios that I look at for our retirement planning. The first is if we just stay in this house, and the 2nd is if we downsize, and there is a significant difference in the required income stream and associated savings, but both models include a fairly nice life style.

Worst case, we could eliminate some of our planned discretionary spending, but planning for the higher number should leave some room for error as well.
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WPatch,

You wrote, Dividends from qualified corporations stock are allowed the preferred capital gains rate if they are held at least 61 days. (91 days for true preferred stock if more than one year's accrual are paid in one dividend.) It should be noted that must so-called preferred securities are "Hybrid" debt instruments, not qualifying regardless of holding period.

For the curious, the preferred stock WPatch is talking about that do not qualify are typically issued by an investment trust, such as a REIT (Real Estate Investment Trust) or bank-owned financing arm. The investment trust is a pass-through entity, so the payments are effectively interest on the assets held by the trust. That's why they don't enjoy favorable tax treatment - you're paying the income taxes the trust doesn't pay.

- Joel
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WPatch,

[I]Dividends from qualified corporations stock are allowed the preferred capital gains rate if they are held at least 61 days. (91 days for true preferred stock if more than one year's accrual are paid in one dividend.) It should be noted that must so-called preferred securities are "Hybrid" debt instruments, not qualifying regardless of holding period.


Joel Curley

For the curious, the preferred stock WPatch is talking about that do not qualify are typically issued by an investment trust, such as a REIT (Real Estate Investment Trust) or bank-owned financing arm. The investment trust is a pass-through entity, so the payments are effectively interest on the assets held by the trust. That's why they don't enjoy favorable tax treatment - you're paying the income taxes the trust doesn't pay.[/I]

WPatch

Actually, REITs, as well as other entities classified as ICs under the Investment Company Act of 1940(open-ended mutual funds, closed end funds, unit investment trusts, true etfs), are not qualified corporations. Stock of investment companies can only pass thru qualified dividends if their investments are qualified corporations.
This is uncommon for REITs. Preferred stock of REITS and closed end funds do not pay qualified dividends.
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I make $130k

How long have you been married ? You make 130K but you said your wife makes 30K.

You don't need a financial planner to have a financial plan. The first think to do is write down your financial goals and have your wife write down hers. Then put them together and agree on the priority of each. Then allocate your money based on that.
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Thanks. 3 years
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Some on here say I don't need a financial planner but I need to know what to invest in. If you look at my portfolio now you will probably laugh. My choices and allocations could make or break me.
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Why not do what the brainiacs here do => invest in the S&P500 buy and hold. Set it and forget it.
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It's that easy CC? lol
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It's that easy CC? lol

Yep. It really is that easy. How much you save - particularly early in your career - is far more important that how you invest those savings. Well, assuming you invest a significant portion of your savings into equities.

You could easily do far worse than adding a grand or two to an S&P 500 index fund every month. And the index fund involves very little effort.

I freely admit that it's possible to do somewhat better by selecting your own investments. But doing so will not make or break your retirement. It's the regular savings habit which will accomplish that.

--Peter

PS - I can't believe I just agreed with CC. (Yes, I know she meant it sarcastically, but I'm agreeing with it on face value.) I think I need to go wash my hands.
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I can't believe I just agreed with CC. (Yes, I know she meant it sarcastically, but I'm agreeing with it on face value.) I think I need to go wash my hands.

You'd do better to wash your mouth out. Very VERY uncivil.
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I can't believe I just agreed with CC. (Yes, I know she meant it sarcastically, but I'm agreeing with it on face value.) I think I need to go wash my hands.
================================
You'd do better to wash your mouth out. Very VERY uncivil.
-------------------------------

You do realize he probably didn't say it with his mouth, right?

Jean

PS. I'm not really sure. Peter may well say what he types.
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