I am a 70 year old single male in excellent health with a 23 year old son. My 94 year old mother has her own funds that cover her living expenses which includes a house I have an interest only loan on that I will own free and clear on her passing.
I have a federal pension with the Civil Service Retirement System and Social Security that includes the Federal Employees Health Benefit plan and Medicare. Assisted living (should a future need arise) in this area is around $4300 a month, well within my pension.
Currently my total monthly expenses comprise 50% of my gross income. That percentage will fall to 19% in 2015/2016 when a car loan and HEL I have are paid off. I am saving 13% ($1000) monthly of my gross income. After all expenses, savings, taxes, insurance, etc, 19% (around $1300) of my gross income is excess.
I have an (medical) emergency fund ($50K) that would cover 12 months worth of my total monthly expenses in a credit union money market account.. I also have ($50K) invested in Vanguard Target Retirement Income fund (VTINX). I also have a cash reserve of $13K in my banks checking/savings accounts. This is where my $1K a month of savings go.
A little background. I have been terrible with money all my life until a couple of years ago. Being in a government job with a known fixed income has made that an easy trap to fall into. I went through decades of living beyond my means on credit cards and loans, going from periods of crazy spending to periods of austerity until I could get caught up and then start all over again. I inherited $50K two years ago from my father and decided it was time to change; have not looked back. I consolidated all debt except my car in a $90K (yes you read that right) 5 yr HEL at 2.9% interest; the car loan is also at 2.9% interest. Together these two loans have a $1580 monthly payment and both will be paid off at the end of 2015. I have no credit card debt. I also have a 5% mortgage my mom carries. I make interest only payments of around $935 on this mortgage. The mortgage will terminate when I inherit the house. I have become a pretty conservative spender and love saving money [now], i'm also a conservative investor. I have no current intent to spend any of the two $50K lumps of money mentioned above for anything other than a really serious emergency and eventually to leave it to my son. I intend to try and build that cash reserve in checking/savings account to a sufficient level to cover all costs of purchases, repairs, etc not covered by normal monthly budget. I have no earned income and am not eligble for any tax advantaged accounts other than tax exempt bond funds. I am in the middle of the 25% tax bracket.
I've been on the BH's forum for about a month and am starting my fourth book.
What are my goals? Answer: 1. Never barrow money again. 2. Save enough money to cover unforseen costs. 3. Pass as much as I can to son.
What would I use emergency funds for? Answer: A life treatening medical situation.
What would I use the $50K in VTINX for? Answer: Nothing.
What would I use Cash Reserve for? Answer: Everything else.
What am I concerned about, whether rational or not? The heighth of the market; time since last major pullback; interest rates going up; general state of countries political and financal condition; in the event of a crash how many years to recover and how that should impact what I do with current VTINX money?
Question #1: What do you think of what I have set up?
Question #2: Considering my pension and what I have described – how much should I put in the cash reserve before I move monthly savings to an investment?
Question #3: Do I have too much in that medical emergency account?
Question #4: Am I too conservative with the $50K in VTINX? Would I be better off putting the money in a more aggressive three fund portfolio with the bond portion in Tax Exempt Muni Bond Fund?