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!
DoD employee, Wife works full time, baby on the way, 3 years into a 30 year mortgage......... ~80k set aside for retirement now
Retire w/ combined annual income of 100k or more at 57
Current retirement vehicles:
-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.
-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.
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.