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A place for Get Rich Slowly readers to ask questions
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It is currently Thu Aug 28, 2014 10:15 pm




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 Post subject: Cheers to early retirement(hopefully), critiques welcome
PostPosted: Thu Jul 10, 2014 10:36 am 

Joined: Thu Jul 10, 2014 10:07 am
Posts: 2
I'm 30 years old and hoping to retire at 57. Please critique my plan to get there.

Current Situation:
DoD employee, Wife works full time, baby on the way, 3 years into a 30 year mortgage......... ~80k set aside for retirement now

Goal:
Retire w/ combined annual income of 100k or more at 57

Current retirement vehicles:
Me
-4800 in a roth IRA annually, in a S&P500 index fund. It's not maxed yet, but we are increasing our contributions as we get increases in pay
-TSP 5% which is max matched by gov't. I plan to keep this number set at 5% until i get to a point where my roth IRA is maxed and can't find a better use for it
-Gov't FERS, retirement based on years of service. I expect to be at 33 years of service. which equals ~36.3% my Hi-3
-Social security ?!?!! who knows if that'll be here so i'm not including that into my plan

Wife
-3000 in roth IRA annually, in a starter index fund. Just found out we could both have one, so we're working on getting hers up to mine and then both to max
-401(k) ~3% for matching
-wife will probably change jobs post baby so pension and her pay, benefits(etc) are subject to change pretty wildly over next few years

Obviously we can't predict the future so my predictions are conservative in nature but here's my thought process. Most of my numbers for performance are based off my contributions solely and did not account for the increase in contributions from raises, inheritance or anything like that. I calculated at my rate of investment and a return of 5% it'd be ~1 million, and at 10% closer to ~2.5 million

My pension should be ~36k-43k which means that i need to come up w/ nearly 2 million if i expect to live off the 3% withdrawls from a retirement account and have 100k a year.

Conclusion
At my current rate of investment I will have to meet ~8% or greater to retire as planned, assuming no help from the wife. This seems obviously flawed because we're married and love each other. So with wife contributing towards retirement as well it seems likely that we can reach ~2 million in combined savings. Plus any potential pension plans she is a part of could reduce that number as well. So stay the course, and don't get divorced lol?

Are there any big holes i'm overlooking in my planning or any investment strategies that i should be considering?


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 Post subject: Re: Cheers to early retirement(hopefully), critiques welcome
PostPosted: Thu Jul 10, 2014 10:57 am 

Joined: Tue Jun 12, 2012 4:34 pm
Posts: 491
Scout84 wrote:
Are there any big holes i'm overlooking in my planning or any investment strategies that i should be considering?


The biggest hole I see is that you want to retire at 57, but the retirement vehicles you're using don't allow for penalty-free withdrawal until 59-1/2. How do you plan on funding that $250k (using your number of $100k/yr)?

The other potential hole depends on whether you've taken account of inflation in your planning. Do you mean you want to retire on $100k/yr in today's dollars or in 2041 dollars?


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 Post subject: Re: Cheers to early retirement(hopefully), critiques welcome
PostPosted: Thu Jul 10, 2014 11:04 am 

Joined: Thu Jul 10, 2014 10:07 am
Posts: 2
o sorry forgot, my wife is 5 years younger than me. so while i'm 57 and retired( :lol: ) she will have 5 more years of work. so she'll be at full income and i'll just have standard pension. then when she's retired my ira(s) will kick in and we'll live off that until hers are available w/o penalty

on the value of the 100k, i'm thinking future dollars. by that point i'll have paid off my mortgage and major debts so that sounds like a decent number for me. obviously if inflation is a beast i'll have to reconsider this number


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 Post subject: Re: Cheers to early retirement(hopefully), critiques welcome
PostPosted: Thu Jul 10, 2014 6:00 pm 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1721
Location: Ottawa, Canada
Scout84 wrote:
my wife is 5 years younger than me. so while i'm 57 and retired( :lol: ) she will have 5 more years of work.


I never understood people with this plan. I've always assumed my wife and I will retire at the same time. We're a team. WE have an income, and WE have expenses. If I can't afford to retire, neither can she.

I'm curious how you envision those 5 years playing out, after you retire, but while she still has to work. Will you sleep in while she wakes up and readies herself for work each day? What will you say to her? "Have a good day at work, I'm going to sleep a bit more then maybe play half a round of golf then have some beers with Tom."

For 5 years?

You don't think she'll start to resent such an "arrangement?" What will you tell her? "Guess you should've saved up as much as me?" It seriously baffles me.


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 Post subject: Re: Cheers to early retirement(hopefully), critiques welcome
PostPosted: Thu Jul 10, 2014 7:02 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1827
kombat wrote:
I never understood people with this plan. I've always assumed my wife and I will retire at the same time. We're a team. WE have an income, and WE have expenses. If I can't afford to retire, neither can she.

I'm curious how you envision those 5 years playing out, after you retire, but while she still has to work. Will you sleep in while she wakes up and readies herself for work each day? What will you say to her? "Have a good day at work, I'm going to sleep a bit more then maybe play half a round of golf then have some beers with Tom."

For 5 years?

You don't think she'll start to resent such an "arrangement?" What will you tell her? "Guess you should've saved up as much as me?" It seriously baffles me.

What if she loves her job and wants to continue working after you decide to hang it up? Does being a team mean that you get to tell her to call it quits?


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 Post subject: Re: Cheers to early retirement(hopefully), critiques welcome
PostPosted: Wed Jul 16, 2014 10:17 am 

Joined: Wed Mar 26, 2008 1:35 pm
Posts: 444
Location: USA
Scout84 wrote:
I'm 30 years old and hoping to retire at 57. Please critique my plan to get there.

First for being 30 years old, having saved 80 and saving in both Roth and TSP, sounds like you are doing a good job!

Current Situation:
DoD employee, Wife works full time, baby on the way, 3 years into a 30 year mortgage......... ~80k set aside for retirement now

Goal:
Retire w/ combined annual income of 100k or more at 57

Current retirement vehicles:
Me
-4800 in a roth IRA annually, in a S&P500 index fund. It's not maxed yet, but we are increasing our contributions as we get increases in pay
-TSP 5% which is max matched by gov't. I plan to keep this number set at 5% until i get to a point where my roth IRA is maxed and can't find a better use for it

For me (I'm at VA) I need to contribute 7% to get to that 5% max pay, so you may want to check that you are getting the max gov contribution.
-Gov't FERS, retirement based on years of service. I expect to be at 33 years of service. which equals ~36.3% my Hi-3
This again is good. It is good to get an estimate, but again you are so far away from that point only good as a reference point.
-Social security ?!?!! who knows if that'll be here so i'm not including that into my plan
I'm going to assume that social security will still be here, but you can include it as 50-75% of expected payments if you want to be conservative.
Wife
-3000 in roth IRA annually, in a starter index fund. Just found out we could both have one, so we're working on getting hers up to mine and then both to max
-401(k) ~3% for matching
-wife will probably change jobs post baby so pension and her pay, benefits(etc) are subject to change pretty wildly over next few years

Obviously we can't predict the future so my predictions are conservative in nature but here's my thought process. Most of my numbers for performance are based off my contributions solely and did not account for the increase in contributions from raises, inheritance or anything like that. I calculated at my rate of investment and a return of 5% it'd be ~1 million, and at 10% closer to ~2.5 million

My pension should be ~36k-43k which means that i need to come up w/ nearly 2 million if i expect to live off the 3% withdrawls from a retirement account and have 100k a year.

Conclusion
At my current rate of investment I will have to meet ~8% or greater to retire as planned, assuming no help from the wife. This seems obviously flawed because we're married and love each other. So with wife contributing towards retirement as well it seems likely that we can reach ~2 million in combined savings. Plus any potential pension plans she is a part of could reduce that number as well. So stay the course, and don't get divorced lol?

Are there any big holes i'm overlooking in my planning or any investment strategies that i should be considering?

I guess I would say, you are so far from retirement, it is hard to make calculations. so many things can change; you or your wife's job for the entire duration of your career, children, divorce, etc, especially as you don't know exactly what will happen once child is here. I'd suggest a) have a heart to heart talk with spouse about what your financial goals are and what her are, and how to get there together. b(re-evaluate in 10 years (savings, goals, and assumptions); make changes as needed.

Any reason you are shooting for 100K a year retirement income? For me it is more important to understand what my expenses are or will be, and be able to meet those expenses. If you do stay in government and retire while still in government you (and spouse) can retain health insurance at same cost as employee which is a big benefit. If you do spousal benefits then that reduces your pension by 10%. Re: retiring at 57, as long as you have worked 30 years at the Fed you can get your pension without reduction which sounds like may be the case for you (otherwise pension is reduced for every year before 60 if long term employee). You can also start making TSP withdrawals earlier than 60 if you make substantially equal payments.
I went through an early retirement planning for the FED, and so they warned us, while previously changes could only be made going forward (new rules for new employees) they recently changed that so they can change federal employees benefits at any time, even for existing federal employees who already accrued those benefits.

So, I would just focus on the basics, which is saving a healthy percentage of your income each year, and not worry so much about particulars until you get closer to retirement age. But if you start working for the gov at a young age (I consider 30 young) retiring at 57 is totally do-able.


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 Post subject: Re: Cheers to early retirement(hopefully), critiques welcome
PostPosted: Wed Jul 16, 2014 10:24 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1721
Location: Ottawa, Canada
VinTek wrote:
What if she loves her job and wants to continue working after you decide to hang it up?


That honestly hadn't occurred to me. I can't fathom not wanting to quit working.

I suppose, if for some crazy reason, she WANTS to keep working, then that'd be the arragement. There'd be no real basis for resentment, because she'd only be working by choice, and not necessity. My comments addressed the situation where one partner continues to work because they simply don't have enough to stop, not because they don't want to retire.


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 Post subject: Re: Cheers to early retirement(hopefully), critiques welcome
PostPosted: Mon Aug 04, 2014 12:30 pm 
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Joined: Thu May 17, 2012 10:05 am
Posts: 1005
Scout84 wrote:
I'm 30 years old and hoping to retire at 57. Please critique my plan to get there.
...
Are there any big holes i'm overlooking in my planning or any investment strategies that i should be considering?


I look forward to following your journey. We are at similar ages (I'm 32). I plan right now to retire at 67 though. We are, however, a single income family.

Good luck! Best wishes! :clap:

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