Are we doing enough?

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seezoram
Posts: 21
Joined: Tue May 19, 2015 2:25 pm

Are we doing enough?

Post by seezoram »

Very new to Bogleheads

Just a sanity check I think we should be ok...

Have we done enough?

I keep telling myself we should be fine
even if our pensions (which are state funded)
go to 50% of projected for some reason
and we just preserve our saving with very modest growth

Have not factored SS....

Him 94000/year
Her 70000/year

Both with contribute 21000 into 403b anually (total of 42000/year)

Will also put aside 30000/year for childrens college.

She will retire in 7 years at age 56 with 60% of FAS (approx. 50000/year)
He will retire in 9 years at age 56 with 60% of FAS (approx. 65000/year)
We could both work longer but hoping to get out sooner :)

Will not have a huge nest egg when it is all said and done but we are
hoping that our pensions are solvent.

Current Debt
No Mortgage
14k Car loan
No other debt

Current Assets
260k in 403b,Roth & Taxable
User avatar
windhog
Posts: 256
Joined: Tue Dec 09, 2008 12:08 am

Re: Are we doing enough?

Post by windhog »

Hi,

Your post is interesting and a bit of a challenge to answer, but I will give it a try. Sometimes a first response will put a thread into play, as other readers chime in, so here goes.

It looks like your family income of 164k is currently adequate to save 42k in your pension plans and 30k for college expenses. This suggests annual expenses of about 90k and a savings rate of over 40%, and a retirement savings rate of about 25%. If your total nest egg now is now about 260k, it appears that your contributions have reached a new level of intensity, and your primary question is easily understood.

Your projected pension benefits appear more than adequate to cover your 90k annual expenses at relatively young retirement ages, and the lack of a mortgage makes planning easier. Do your pensions have any sort of COLA benefit, and does the absence of a mortgage mean you own your residence? I would strongly suggest you look at these numbers in the context of federal and state income taxes, something that often gets ignored in retirement planning. Some states do not levy income tax on state pensions: is this the case for you?

I have to comment on your conscious choice to ignore SS benefits. Does this mean you and your spouse are ineligible for benefits, due to working in a state system that exempts you from SS taxes? Alternatively, you might have made this choice as a consequence of a political opinion. If so, it appears that you are judging your state benefit to be more secure than our federal system. For planning purposes it seems to me that you should at least recognize both resources as having some type of future and possibly discounting both as you have suggested for your state funded benefits.

Finally, I think it is great that you are setting aside college expenses. At the same time, it is worth remembering that education loans for your children are available. Retirement loans for you and your spouse are not. If you are worried about having enough, retirement savings need a higher priority than college expenses.

My short answer to your question is simple. It looks like you are doing just about all that you can right now. Will it be enough over the next 5-10 years? It looks pretty good to me, and you appear to have control over your retirement dates and income stream to adjust as needed. You should not overlook this advantage in your planning.

I hope this helps.
Paul
nimo956
Posts: 914
Joined: Mon Feb 15, 2010 5:07 pm

Re: Are we doing enough?

Post by nimo956 »

No where in your post did you mention your projected annual expenses in retirement. Have you gone through this exercise? Will your pension income be enough or will you need to supplement it by drawing down your savings?
50% VTI / 50% VXUS
Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Are we doing enough?

Post by Grt2bOutdoors »

Unable to assess - what are your current living expenses? What will your projected living expenses be in retirement, will you upscale your life from today? How are your current investments invested? What is the current funded status of your state retirement pensions?
How much will healthcare cost you, if any in retirement?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
talltodd
Posts: 140
Joined: Thu Apr 12, 2012 9:39 pm

Re: Are we doing enough?

Post by talltodd »

Pay off your car debt. Also if you are uncomfortable with your nest egg consider putting less toward kids college.
Rob Bertram
Posts: 859
Joined: Mon May 05, 2014 12:15 pm

Re: Are we doing enough?

Post by Rob Bertram »

Are you contributing to a Roth IRA for both Him and Her? That is $5500 per year per person. Once you are age 50, you can contribute an extra $1000 catchup.

As others have mentioned, fill up your tax-advantaged accounts before saving up for children's college. Even after filling up retirement accounts, it may be more beneficial to invest in a taxable account instead of a 529 account. Do a search on this forum for Livesoft's posts. He has some good advice on taking advantage of education tax credits. For example, paying some expenses out of pocket are the only way to get some tax credits.
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Are we doing enough?

Post by The Wizard »

That 40% savings rate is huge, so their expenses have to be well under control.
OP's total portfolio size seems modest for your age and savings rate, so perhaps they were late starters. No matter since things are going well now.
Also need to know projected offspring/college timeframe, all done in six years or so?

In a few years, you can start figuring desired income in retirement, expenses + discretionary. For now, just staying the course seems like a big accomplishment...
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Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Are we doing enough?

Post by Grt2bOutdoors »

The Wizard wrote:That 40% savings rate is huge, so their expenses have to be well under control.
I don't include 529 plan savings as "savings for retirement". Yes, they can access the principal contributions without penalty, but withdrawals are proportional gains and contributions if not used for education, so I would not count that as "savings rate". The true savings rate is roughly 26%, not including Social Security if they are participating in that program. That's a decent rate of savings, but given they are planning on hanging up their spurs in 7 and 9 years, not sure if even a good 26% savings rate would be sufficient to meet their needs in early retirement.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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