@momoffour - That’s great! Bet it’s a wonderful feeling.
I hope to retire later this year, and I’ve been thinking in the last days perhaps I will sign my emails with “Emeritus” after my name/title. Not sure I will do it but was a fun thought.
I left my toxic job in early September, and I planned to get another job. The longer I don’t work, the less I want to work. We’ll see what happens as time goes by. I will probably do something, but maybe not. I like the freedom of not “having to” work!
A millennial gets a financial makeover:
https://www.seattletimes.com/business/young-software-designer-finds-money-brings-its-own-concerns/
One thing I disagree with the financial planner here. She needs to put more of her nice salary into the 401(k) and worry about real estate later. The $770 spent each month on eating out can be easily turned into a nice nest egg. She can easily afford to max out her 401(k).
Many on this thread are thinking like us. On the retirement countdown. Trying to figure all the things to have primary residence sold (but first figuring out where we want to live and perhaps having a modest primary and modest secondary). Will stay in primary residence at least some after retirement. Trying to cash flow some work now, and will do more with mortgage ending months before retirement. Residence sale will move up if DD/SIL have a permanent location near where we would like to live.
Seems like she has good problems to have: no student loan debt, “natural” spending level (despite the eating out expenses) lower than her relatively high income, resulting in a growing bank account that just needs to be deployed and invested appropriately for longer term goals. A much better situation than those barely keeping up with debt…
Having a “natural” spending level that is relatively low compared to realistic income levels is probably a big factor in saving and investing money (even on a relatively modest income) without feeling deprived.
Dang, I’m kind of in shock. We had planned to retire at age 60 (about three years from now), and starting putting numbers to it. Looked at what the expenses are for working (disability insurance, higher taxes, Medicare and FICA, commuting costs, union dues, 401K contributions…I realize that’s savings, but not something we’d do after retiring). Mentioned this to our son, who started laughing and said, “So, basically you’re working for $XX each?” The number being about 1/3 of what he makes, or our monthly food/drink/coffee budget. That number was really low.
Then when I got home, I started running things through our company pension calculator. I’d always thought it was a big hit to retire early, plus we’d need to delay taking the pension for a year to increase it. Then I realized that retiring early is a tiny hit, we shouldn’t delay, and social security leveling option increases the pension dramatically, until age 65 or 68, the heavy traveling years. Now suddenly we are thinking about retiring at the end of the year, or next summer.Or if we really wanted to, tomorrow.? It feels scary, but exciting.
quote=“busdriver11;c-22561774”. Mentioned this to our son, who started laughing and said, “So, basically you’re working for $XX each?” The number being about 1/3 of what he makes, or our monthly food/drink/coffee budget. That number was really low.
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First off, congrats on being in a place where you can afford to retire! That’s great news, right? Having choices to work or not work always puts you on the winning team.
Second, knowing your and your husband’s profession (you both make very nice salaries), I doubt things are as dire as you paint them in the first paragraph. I have no idea of your commuting costs, but remember that you are paying yourself with your 401K and making yourself richer. That’s not equatable to taxes or a sunk cost. Also, in terms of disability insurance, if you can afford to retire, perhaps you scrap that at some point and “self-insure”. You’re not likely to keep carrying that cost into retirement, are you?
It’s about cash-flow, when comparing pre-retirement income to post-retirement expenses.
It’s one reason those “you need 80% of your pre-retirement income” articles are bunk.
My guess is the disability insurance is provided by the company but paid for by payroll deduction. Not needed (or possible to get) in retirement, but it’s another chunk of your pay you don’t need to come up with in retirement.
Somewhere in the early pages of this thread, I figured out that if I took out all the expenses I wouldn’t have in retirement (mortgage, 401k, college, higher income taxes, FICA, etc) I only needed to replace something like 40% of my income to maintain my standard of living.
Good point about the cash-flow perspective, @notrichenough. I was misreading it from a “we don’t have much left” angle.
Going to apologize up front that I have not read this whole thread. I just got back on cc after a couple of year hiatus. Just going to answer the OP’s initial question. We think we need about 10mil to reture comfortably. Halfway there so the retirement age depends on when we hit that goal. We are still in our 40’s (but barely)
@busdriver11, I’m assuming that you will have retiree health benefits? Because that would be a big unknown, correct?
Yes, @deb922 , that is something that is an additional expense. We have an account set up that has enough to cover that. We can keep our exact same insurance, but instead of paying about 25% of it, we will have to cover it ourselves (though our union does give us some money towards it).
And @notrichenough has it right, we are thinking about cash-flow, really with the perspective that I don’t know if I’ll feel comfortable retiring unless I know that we can do it without dipping into our investments and retirement funds. I realize that sounds silly, but I am having a hard time thinking about drawing anything down, particularly at a younger age.
As far as disability insurance, @doschicos, we would drop it as soon as we retired. Probably don’t need it now, since our company covers 60% of our income if we become disabled, but after my husband had a freak medical issue awhile ago, I got scared and purchased it for us. Some of the additional cashflow expenses while working for the two of us are:
Disability insurance-10K
Commuting costs-5K
Union dues-12K+
401K contributions-about 74K.
Medicare, FICA, tax rates ranging from 24-37% on the difference in income.
Of course, we could just drop the 401K contributions and disability insurance, for more cash flow now, but I don’t think we would do that.
@busdriver11 I’m curious how you are able to contribute $74k/yr to 401k when limit is $25k/yr over 50, so for a two income couple, $50k.
@itsgettingreal21, the 401K limit this year is 26K (19.5K plus 6.5K catch-up contribution over 50 years old), plus you can do mega backdoor Roth, and in our situation we are both limited to about $11.4K. If we were really motivated, we’d do a backdoor Roth, but I don’t even want to think about that.
@itsgettingreal21, her plan may allow after-tax contributions or have a Roth provision. She may also be including the value of match/profit sharing. Max employee deferrals with catch-up is $26k in 2020, but the 415c limit (defined contribution limit) is $57,000. That limit includes employee deferrals, employer match, employer profit sharing contrib, employer stock grants in a qualified retirement plan and after-tax employee contributions.
I looked at DH’s deductions in his first paycheck this year, and a LOT of them disappear when he retires – life insurance, LTC, disability, deferrals, savings allocations, mandatory pension contributions, Social Security deductions, etc. We’ll see what we do about the LTC, esp for me. His commute is almost $20/day on public transit, so there’s a chunk right there, too.
We tracked our actual expenses and cash outflow for about 6 months. We were very pleasantly surprised that we spent as little as we did…and that six months included a car purchase and a couple of out of town plane tickets.
We did this ourselves. But our financial planner was very happy to see this.
What’s a backdoor Roth? If there’s a way to increase annual contribution, I’m definitely interested in learning.
(I assumed employer contribution was not included since the poster was talking about expenses that would go away in retirement).
No, you can’t increase the annual limit through backdoor. It allows you to convert to Roth when you were not allowed too contribute to Roth directly due to the income limit. You contribute to tIRA first and convert to Roth. That’s backdoor Roth. The annual contribution limit stays in place.
Most retirement calculators I have seen are sponsored by financial institutions, financial planners, etc. They have a vested interest in people saving more. Calculators I have seen say that people with my income typically need 80-95% of their pre-retirement income in retirement (and all income levels are typically listed in that range). By my calculations looking at actual cash flow and what expenditures that will go away), we will need well less than half of that. And healthcare costs are often listed as a big wildcard but paying premiums of $24k/year with $6k/yr family deductible, I think I will be ok in retirement. Not true for everyone which I why you have to look at your own circumstances, needs, goals, etc.
This thread is now reminding me of a thread that talked about how parents were going to save so much money when their children left for college: reduced food bill; reduced water usage; reduced car insurance, etc. 