Here's my situation.

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Topic Author
stevemed
Posts: 17
Joined: Thu Jan 15, 2015 9:36 pm

Here's my situation.

Post by stevemed »

I have just found this site a couple days ago and I am trying to learn as much as possible.Please give me your advice on how I should proceed going forward.

Me-45
wife-43
I was working in a government job and became injured and now receive a tax free pension of $5,100 a month and will grow to $6,000 a month at the age of 59 and then will be capped for life.

I am not eligible for S.S because my government job never paid into it but my wife is.

My wife makes 76,000 a year and 6% is put into vanguard IRA through her job.(no employer match).In addition she will get a small pension of about 1,000 a month to begin at age 62.

We also just started putting money into a roth (only 200 a month but it's a start).

We have a small amount of 140,000 that from all of you I have learned should be in index funds.(Thanks).

We have not always been the best with our savings and I am embarrassed after reading all of the wonderful things you Bogleheads have been able to accomplish.

I was able to just recently pay off all credit cards and only have a car payment and a mortgage wich I am on pace to pay off by the time I am 55.

I can not work(part of the terms of my pension)but would like for my wife to retire in 15 years.


Question 1...What index funds should I choose for our 140,000 in Vanguard and what % in each index.Since I only have 140,000 I want to be a little aggressive but not crazy.

2)I know I am fortunate to have all of this guaranteed money coming in so what kind of income do you think I will have at age 60...meaning guaranteed money along with projected money from future investments.

I am some what ashamed at how little I have saved but I have found you Bogleheads and with your help I hope to do things the Boglehead way going forward.

Thanks in advance.
chaz
Posts: 13604
Joined: Tue Feb 27, 2007 1:44 pm

Re: Here's my situation.

Post by chaz »

Go to www.vanguard.com and look at Target Retirement funds and Balanced Index fund.

Good luck.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page
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TomatoTomahto
Posts: 17158
Joined: Mon Apr 11, 2011 1:48 pm

Re: Here's my situation.

Post by TomatoTomahto »

Stevemed,

Do not be ashamed. The majority of BHs did something dumb, sometimes colossally dumb, in the past. You are still young.

I never make numerical predictions, so I won't start now. My advice is to not let your feelings about past mistakes push you into being overly aggressive. Slow and steady wins the race (which is good advice for distance running, which this is analogous to, as opposed to sprints).
I get the FI part but not the RE part of FIRE.
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packet
Posts: 839
Joined: Sun Nov 23, 2014 10:23 am
Location: The pub

Re: Here's my situation.

Post by packet »

Keep reading around these forums and the wiki... check out the 3 fund portfolio and variations thereof.

Don't rush! Take your time (weeks/months) before doing anything. Take that time to carefully craft your plan (again, lots of great info in the wiki and forums on how to do this). Once you have a plan, act on it, then stick to it religiously for the next 20 plus years.

Don't look back, you're here now and (it sounds like) ready to give this saving thing some focus.

:beerCheers,
Packet
First round’s on me.
trueblueky
Posts: 2365
Joined: Tue May 27, 2014 3:50 pm

Re: Here's my situation.

Post by trueblueky »

+1 on tomatotomahto's comments

Your wife can get an estimate of her SS at the Social Security's retirement estimator http://www.ssa.gov. Try a variety of scenarios on when she stops work and when she begins to draw SS.

Plug that info and your other data into the retirement calculator at i-orp http://www.i-orp.com. Again, try a variety of scenarios.

Since your pension is tax-free and your wife's SS is not likely to be taxed, a Roth may not be best for you. Typically, a Roth is best when your future tax rate is at least as high as your current tax rate. I don't see that for you, as long as both are alive. You may want to ask others specifically about that, given most of your income in retirement will be tax-free.

Does your pension have a survivor annuity? Hers?

It looks like you'll have $90k or more from SS and pensions, plus whatever you get from investments. Depending on where you live, that should be plenty, especially since your mortgage will be paid. However, it appears you spend more than $130k (including taxes) now, which is a red flag. Reducing your living costs now and saving more will make your future more secure.

Your biggest unknowns are inflation and healthcare. What are you doing to protect in those areas?
Topic Author
stevemed
Posts: 17
Joined: Thu Jan 15, 2015 9:36 pm

Re: Here's my situation.

Post by stevemed »

Thank you.

I am lucky to have family health care until I hit medicare and the I will get plan sixty five with it.As far as my pension goes the full amount goes to my wife if I die first until she dies.Keep the advice coming and thank you all so much.

So you think I should put the money going into a Roth into my wives 401k instead?
CMartel
Posts: 12
Joined: Wed Dec 31, 2014 10:09 am

Re: Here's my situation.

Post by CMartel »

stevemed wrote:I have just found this site a couple days ago and I am trying to learn as much as possible.Please give me your advice on how I should proceed going forward.

I am not eligible for S.S because my government job never paid into it but my wife is.
Even though you may not be eligible for SS on your own, you may be eligible for 1/2 the amt your wife receives as SS. Maybe others can confirm?
gclancer
Posts: 808
Joined: Sat Apr 27, 2013 10:34 am

Re: Here's my situation.

Post by gclancer »

You indicate that your wife has a 401(k) (you call it an IRA) with no match. I would consider maxing out Traditional IRAs at Vanguard (currently $11,000 limit per year) before contributing to an employer 401(k) (specifically because there is no match).
lack_ey
Posts: 6701
Joined: Wed Nov 19, 2014 10:55 pm

Re: Here's my situation.

Post by lack_ey »

On the other hand, a pension from the government is pretty secure, and $5k-$6k a month by itself should keep a roof over your head no matter what, at least for a long time until inflation makes that significantly less.

I mean, a single premium immediate annuity paying $5.8k or so for a man aged 50 is worth around $1.3m, according to a site's calculator. Add on a few hundred thousand to the value since you're only 45 now.

If you count pensions, annuities, Social Security, etc. as fixed income investments, no matter what you do with the $140k, your "portfolio" may be considered to be dominated by fixed income and potentially too conservative. However, many don't consider these things as fixed income. I think you need to decide for yourself how to think of these things.

However, the better thing to do is determine your current spending rates and how much you'd expect to spend in the future. Then we can see how aggressive future savings and investments need to be. How much is the mortgage, and at what percent interest? Same for the car loan. What federal and state tax brackets are we looking at? Also, as mentioned above, what are the conditions on the pensions for survivors?

For future income, the key is to save as much as possible and make as much use of tax-advantaged space as possible. While your wife still has income, you're allowed to contribute to an IRA even though you don't work. You should both be contributing into IRAs to the maximum ($5.5k per year, more when you turn 50 and if limits get bumped) every year. In fact, you can still contribute to a year's limit even in the following year. You have until mid-April 2015 to contribute your $5.5k for 2014, so make sure to do that. As for traditional or Roth, depends on the tax details and other things.
Billyboy
Posts: 259
Joined: Mon Mar 24, 2008 2:21 pm
Location: California

Re: Here's my situation.

Post by Billyboy »

First off, sorry about your injury. You've certainly found the best forum to educate yourself and set up the best plan moving forward. My thoughts only are to make a plan and stick to it. We basically use the 3 fund approach which I learned on this great site. I do deviate slightly, like many others here, i.e. Short-Term Bond Index Fund, from which I currently take my RMD's (showing that I'm quite older than you). I also have Vanguards Mid-cap Index Fund, Tips Fund and two individual Stocks all in IRA's held at Vanguard. Several CD's with Ally Bank and Vanguards Calif. Tax-Exempt Intermediate-Term Bond Fund in our taxable accounts.
I'm surely no expert, so I'm asking others here who are much more knowlegible than I, if it's best to put anything at all in the wife's IRA, which has no match? Would she be better off to fully fund the Roth whenever able to, then go back with any excess in the years ahead to put in the IRA?
Although they may want the tax deduction.
You're off to a good start, just keep it up.
Bill
trueblueky
Posts: 2365
Joined: Tue May 27, 2014 3:50 pm

Re: Here's my situation.

Post by trueblueky »

CMartel wrote:
stevemed wrote:I have just found this site a couple days ago and I am trying to learn as much as possible.Please give me your advice on how I should proceed going forward.

I am not eligible for S.S because my government job never paid into it but my wife is.
Even though you may not be eligible for SS on your own, you may be eligible for 1/2 the amt your wife receives as SS. Maybe others can confirm?
The Government Pension Offset generally prevents you from receiving spousal SS if a non-SS-covered job provides your pension. (There's a formula -- I plugged $6000 pension into it and got $0 spousal as a result.) I couldn't find if disability pensions are an exception. It would be good to discuss this with SS at some point.
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ruralavalon
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Location: Illinois

Re: Here's my situation.

Post by ruralavalon »

gclancer wrote:You indicate that your wife has a 401(k) (you call it an IRA) with no match. I would consider maxing out Traditional IRAs at Vanguard (currently $11,000 limit per year) before contributing to an employer 401(k) (specifically because there is no match).
Is that a 401k that your wife has at work? Is that where you have the $140k?

If that's a 401k your best move is probably opening two traditional IRAs at Vanguard, one for each of you, and contributing $5.5k/yr to each. For funds consider using the Balanced Index, a LifeStrategy fund or a Target Retirement Fund.

What low expense ratio funds (fund names, tickers & expense ratios) are offered in her 401k?

Do not be overly aggressive trying to "catch up", that's a bad strategy that can easily backfire. At ages 43 & 45 something in the area of 60/40 or 70/30 stocks/bonds would be within reason in my opinion, but read up on the subject and pick an asset allocation that you are comfortable with.
Last edited by ruralavalon on Sun Jan 18, 2015 7:27 am, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
John Z
Posts: 521
Joined: Sun Nov 14, 2010 4:42 pm

Re: Here's my situation.

Post by John Z »

Welcome!
My favorite site to refer people looking for an index fund portfolio is:
http://whitecoatinvestor.com/150-portfo ... than-yours
Topic Author
stevemed
Posts: 17
Joined: Thu Jan 15, 2015 9:36 pm

Re: Here's my situation.

Post by stevemed »

Thank you all so much.I will do my homework.My plan was to be debt free at 55 (no mortgage) and if I can max out my IRA's with a 6% return from now till age 60 I should have somewhere around 700,000 in IRA's.With a swr of 4% would give me 28,000 per year (before taxes) and my pension of 72,000 per year (tax free) would generate around 8,000 a month. Which would give me a very comfortable life with no bills.My wife will also get a pension at 67 of $1,000 a month and social security so I could use those to slow down ( or even stop) withdrawal from the IRA.Our health insurance is covered. (from my old employer) Until I reach Medicare.I could also use my IRA (when my wives payments kick in) to hedge against inflation.How does this plan sound.Any suggestion would be great.Also one last thing , we have a rental property which I intend to use to pay the taxes on my home so that bill will be gone.
Topic Author
stevemed
Posts: 17
Joined: Thu Jan 15, 2015 9:36 pm

Re: Here's my situation.

Post by stevemed »

Sorry but one last thing.Most of the 140K about 120K was just moved to vanguard as IRA roll overs.My wives job mandates that she must put in 5% of salary into her work pension plan.( a new state of Rhode Island Hybrid plan ). Our tax bracket is 25 % should I max out that our roths or Vanguard IRA.I truly believe you people are a god send for taking the time to help others. Thanks again. :happy
Topic Author
stevemed
Posts: 17
Joined: Thu Jan 15, 2015 9:36 pm

Re: Here's my situation.

Post by stevemed »

bumped
niceguy7376
Posts: 3007
Joined: Wed Jul 10, 2013 2:59 pm
Location: Metro ATL

Re: Here's my situation.

Post by niceguy7376 »

Looks like it might make more sense if you post all the info in the format recommended on this site. Please take a look at the link in the signature.

This will help in providing an aerial view of your situation and solutions at the same total picture.

I did not understand what it means by "we have a rental property which I intend to use to pay the taxes on my home so that bill will be gone."
tibbitts
Posts: 23728
Joined: Tue Feb 27, 2007 5:50 pm

Re: Here's my situation.

Post by tibbitts »

stevemed wrote:bumped
Maybe you missed the memo but around here, bumping is comparable to posting porn (and not the investment kind.)
Beth*
Posts: 734
Joined: Wed Apr 30, 2014 9:57 am

Re: Here's my situation.

Post by Beth* »

trueblueky wrote:
CMartel wrote:
stevemed wrote:I have just found this site a couple days ago and I am trying to learn as much as possible.Please give me your advice on how I should proceed going forward.

I am not eligible for S.S because my government job never paid into it but my wife is.
Even though you may not be eligible for SS on your own, you may be eligible for 1/2 the amt your wife receives as SS. Maybe others can confirm?
The Government Pension Offset generally prevents you from receiving spousal SS if a non-SS-covered job provides your pension. (There's a formula -- I plugged $6000 pension into it and got $0 spousal as a result.) I couldn't find if disability pensions are an exception. It would be good to discuss this with SS at some point.
I don't know if your wife is counting on getting your pension if you die first, but if she is eligible to receive all or part of your pension if she survives you, she may also be subject to a Government Pension SS Offset that would reduce her social security:

http://www.ssa.gov/pubs/EN-05-10007.pdf

You need to make sure that you understand the effects of a government pension from a job where social security is not withheld for both spouses (the one covered by social security and the one who is not).
Topic Author
stevemed
Posts: 17
Joined: Thu Jan 15, 2015 9:36 pm

Re: Here's my situation.

Post by stevemed »

tibbitts wrote:
stevemed wrote:bumped
Maybe you missed the memo but around here, bumping is comparable to posting porn (and not the investment kind.)
Sorry did not mean to offend anyone.I am still learning.
Topic Author
stevemed
Posts: 17
Joined: Thu Jan 15, 2015 9:36 pm

Re: Here's my situation.

Post by stevemed »

niceguy7376 wrote:Looks like it might make more sense if you post all the info in the format recommended on this site. Please take a look at the link in the signature.

This will help in providing an aerial view of your situation and solutions at the same total picture.

I did not understand what it means by "we have a rental property which I intend to use to pay the taxes on my home so that bill will be gone."
What I meant was the income from my rental will for for the costs of the rental(taxes and insurance) as well as the taxes and insurance on my home.
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