How Am I doing ? (39 y/o, NW- 3.5 mil)

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ilovepiano
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How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by ilovepiano »

[See my post below. --admin LadyGeek]

Hi Bogleheaders,

Taxable: 1147 (combination of index funds, and stocks)
401K/matching funds: 829
Deferred Comp: 265
529 plans: 150 (2 children 6, 7)
Roth: 75

New annual Contributions
401K- 36 + Employee contrib- 20 = 56
Deferred comp- 50
Roth 10

Taxable contributions: 120-150/year (may decrease if one of us goes part time)
529 Contributions: 26
Cash 50

House: 950 (paid off)

My Age 39, Spouse 39
Gross Income: 500+

Annual expenses 60

Retirement age 50, expenses in Retirement ? 120
-
Want to see if anyone is in a similar situation, and if anyone has any suggestions.
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ilovepiano
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How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by ilovepiano »

Forgot to mention, pension expected at age 60 of 100K/year
RosieQ
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by RosieQ »

You should be fine. Enough to quit now if needed. Since you'll work until 50 you'll have plenty of breathing room. Depending on how much you like your job vs balancing time for family I would heavily consider going to part time in a situation like yours. Enough work to feel busy here and there but extra time for vacations and enjoying family. Make your 120k in living expenses, max out your tax advantaged savings accounts and call it a day. There is no reason to live as cheaply as you are while making and saving as much as you are without a specific goal. Do you want to retire with 20 million in the bank and then live rich? Do you want to leave a large amount to your children or charity?
random_walker_77
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by random_walker_77 »

"How am I doing?" Seriously?

I'll offer a serious response anyways. Congratulations, you're fine. How'd you feel about retiring earlier than 50?

Don't know if you're for real, but I also don't see a reason to go negative. I like dreaming about winning the lottery too, so let's look at the numbers, and project some scenarios.

Seems like you're on track to get to 5 million in investments (not net worth) by about age 47, knock on wood. That'd be enough to probably carry you through retirement on its own, but you have a pension that kicks in at 60 and you also have social security.

Is that pension fully vested, or does it assume working to some specific age? And is that pension supposed to be the equivalent of 100K in today's dollars, or is it 100K/yr in year=2036 dollars

I'd advise plugging numbers into a spreadsheet and playing around with things: Assuming 34% effective averaged tax rate, 500K income, 200K budget, 158K taxes, and ~$180K saved, and assuming 4% returns on your overall portfolio in real terms, you might expect to grow your portfolio from 2.5M to 4M in the next 5 years, assuming no major stock market crashes.

Code: Select all

					avg tax rate: 26% federal + 8% state		401K contrib	real return from portfolio		
			assume 2% real raises		  0.34		             36	                     4%		
			0.00%							
year	age	funds	income	budget, excluding mortgage payment	taxes	saved	big expenses	investment income	mortgage payment	
0	39	2500	500	200	158	178	0	100		
1	40	2778	500	200	158	178		111	0	
2	41	3068	500	200	158	178		123	0	
3	42	3369	500	200	158	178		135	0	
4	43	3682	500	200	158	178		147	0	
5	44	4007	500	200	158	178		160	0	
6	45	4346	500	200	158	178		174	0	
7	46	4698	500	200	158	178		188	0	
8	47	5064	500	200	158	178		203	0	
9	48	5445	500	200	158	178		218	0	
10	49	5841	500	200	158	178		234	0	
11	50	6252	500	200	158	178		250	0	
12	51	6681	500	200	158	178		267	0	college?
13	52	7126	500	200	158	178		285	0	
14	53	7590	500	200	158	178		304	0	
15	54	8071	500	200	158	178		323	0	
16	55	8572	500	200	158	178		343	0	
Assume the stock market crashes, and assume the real return is only 3%, and you're still in great shape. You'd probably grow your portfolio to $3.5M by 45. (modelled as a 500K hit to the portfolio this year)

Code: Select all

			real return from portfolio		
		3%		
				
year	age	funds	big expenses	investment income
0	39	2500	500	75
1	40	2253		68
2	41	2499		75
3	42	2752		83
4	43	3013		90
5	44	3282		98
6	45	3558		107
7	46	3843		115
8	47	4137		124
9	48	4439		133
10	49	4751		143
11	50	5071		152
12	51	5402		162
13	52	5742		172
14	53	6093		183
15	54	6454		194
16	55	6826		205	
Let's say you decide to downshift/retire at 45 to pursue other passions. Conservatively, if you have 1M at 60, it'll throw off 20K in perpetuity and should grow to cover inflation on your pension. So if you did something insanely conservative like take 15 yrs x 120K = 1.8M and put into a TIPS ladder, and then set aside another 1M to supplement your pension at age 60, you'd be set. This is super conservative and you'd be fine w/ less, but I'm arguing 2.8M in assets at age 45 is a conservative upper-bound on what you'd need.

Even in the 2nd scenario, by age 45, you've got 3.5M and that would give you quite the safety net to cover cost overruns elsewhere, such as for college. Heck, by 47, you're down to a 3% withdrawal rate, which would likely cover your entire retirement on its own. (And you've got a pension and SS)

Run some numbers and scenarios. You've definitely got lots of options. (And re-reading this, you're actually saving a lot more than 180K/yr? So, are you sure you don't want to retire in the next few years?)

Usual caveats: examine that 120K budget. Is that actual post-tax spending, or pre-tax? Does that include health insurance? But when you've got this kind of scenario, it hardly matters.
sawhorse
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by sawhorse »

What I really want to know is, why are you only contributing 10k to the (presumably backdoor) Roth instead of 11k?

And how are you only spending $60k a year with two young children and a $950k house? What are your property taxes?

And why do you anticipate that your expenses will double when you reach retirement?
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toto238
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by toto238 »

There is literally no way to calculate this that doesn't come out to "you're doing fantastic".

The reality is that you already have more saved than most Americans will earn in an entire lifetime.

Average American in your age group has a net worth (not counting home equity) of about $15,000. Just your investments are over 150x that. So it would take 150 average Americans to equal what you have.

You have enough saved to provide yourself with $120,000 in income + your $100,000 pension. That's $220,000 total per year. That's enough for 10 of us mere mortals who are at least a bit frugal to retire right now.
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by ks289 »

The retirement planning seems straightforward for you as others have posted. With early retirement at age 50 before the pension you should easily have enough in taxable accounts. I assume that the projected increase in expenses includes paying for healthcare which is a large added expense for early retirees even healthy folks.
You may decide to focus your attention on other components of your personal finance picture such as estate planning. You may decide to try to plan for sizable gifts to charity or for your kids beyond college costs (down payment, wedding, car, living expenses, retirement) if you are so inclined.
livesoft
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by livesoft »

The OP is doing about as well as the folks who responded in the If your networth is over $3 million, how did you do it? thread. I hope they would not mind posting over in that very lengthy thread.
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by IlliniDave »

Well, this might be a fictional caricature making fun of the stereotype boglehead ... relatively high income, large pile of assets, low debt, somewhat frugal, wringing hands over 'having enough'. Not everyone out on the interwebs thinks we're as cool as we think we are :D

But it case it is a serious question, the OP needs to seriously invest in his own financial literacy. Dr Bernstein's books come from about as conservative a slant as I've ever seen (short of outright doomsday porn). OP should read The Four Pillars or maybe one of the other selections from the list of recommended reading that I'm pretty sure is in the wiki or something.
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snackdog
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by snackdog »

Outside the automatic 401K savings, you only have a bit over two years salary saved up. You could definitely do better. The pension figure sounds high. How long have you been working?
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by Impromptu »

If your goal is financial security through a long retirement, you'll be fine. Instead of working on getting more money, now you may want to work on securing that money. Converting that 401(k) to a roth IRA over the duration of your retirement can limit the bite that the government will take. As can using that 401(k) for charitable donations.

If your goal is to make as much as possible, bet it all on black.
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by LadyGeek »

ilovepiano, Welcome!

Long story short, you're doing great.

Unfortunately, your situation has generated quite a number of off-topic responses which derailed the thread. I have removed everything except for your posts.

ilovepiano, please PM me if you wish to reopen the thread. Let's keep this thread locked until I hear from ilovepiano.

To our experienced members: Please Do Not Bite the Newcomers

(Topic locked.)
Update: Topic unlocked, see below.
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ilovepiano
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Follow up post

Post by ilovepiano »

Thanks for the great replies especially to random walker. I wanted to respond to the person that said I could be doing better because I only had two years salary saved. I agree, it's because I have been aggressively paying off house over the past two years. I'm now going to be as aggressive in investing in vanguard funds. I sold about 125 in vanguard funds to make the last house payment (when the DJ was 17.5) so that was good timing. Spouse is worried about finances so that was part of reason for posting. Turbulent times.
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by LadyGeek »

^^^ FYI - I moved ilovepiano's post into the original thread.

ilovepiano - please don't start a new thread. PM me to discuss, thanks.

(Thread remains locked.)
Topic unlocked, see below.
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by LadyGeek »

After PM discussion with the OP, I have moved some earlier posts back into this thread so the OP can reply.

Please stay factual and respond in a civil manner.

This thread is now unlocked.
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ilovepiano
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by ilovepiano »

10 years. Pension is 2% per year for first 20 years after that 1% /year of highest salary (if you work 25 years you get 45% of highest salary)
snackdog wrote:Outside the automatic 401K savings, you only have a bit over two years salary saved up. You could definitely do better. The pension figure sounds high. How long have you been working?
CoAndy
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by CoAndy »

It seems to me like you could retire earlier than your stated goal of age 50. Any interest in doing that?
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by Gill »

ilovepiano wrote:10 years. Pension is 2% per year for first 20 years after that 1% /year of highest salary (if you work 25 years you get 45% of highest salary)
snackdog wrote:Outside the automatic 401K savings, you only have a bit over two years salary saved up. You could definitely do better. The pension figure sounds high. How long have you been working?
There is an IRS cap on that pension of $210,000.
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by sfchris »

This seems like a humblebrag post, OP.

It should be obvious that you can retire right now. And you will have most of that money left over when you die if you don't give it away.

Anything you earn between now and when you retire will be going to your heirs or charity. I'm sure you love what you do, but if not you should focus on quality of worklife/family life since the money is not really needed.
Last edited by sfchris on Mon Sep 07, 2015 6:30 pm, edited 2 times in total.
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by sfchris »

.....
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ilovepiano
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by ilovepiano »

Nope.

What do you bogleheaders think about aggressively increasing deferral compensation in this situation (I can defer up to 100% of my salary). Seems like a win win to me.

CoAndy wrote:It seems to me like you could retire earlier than your stated goal of age 50. Any interest in doing that?
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by ofcmetz »

ilovepiano wrote:Nope.

What do you bogleheaders think about aggressively increasing deferral compensation in this situation (I can defer up to 100% of my salary). Seems like a win win to me.

CoAndy wrote:It seems to me like you could retire earlier than your stated goal of age 50. Any interest in doing that?

I'm kind of curious how one defers 100% of such a high salary.

That being said, why not save more tax deferred if you are able and willing to.


To answer your previous question, your savings/ income is impressive. I would look at how much income you need in retirement to live the lifestyle you expect. It could be that you are already there, or it could be that you need to save a bunch more. It's obvious that if you wanted to live on 50 to 75K a year, you are almost done. If you want a few 100K a year then continue on your course.
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by ilovepiano »

I'm kind of curious how one defers 100% of such a high salary.

* Non - Qualified Deferred comp plan-- If company goes insolvent you are treated as a general creditor. Chances of this happening for my company in the next 10 years is probably < 1%

* That being said, why not save more tax deferred if you are able and willing to.

Already maxing out tax deferred space

To answer your previous question, your savings/ income is impressive. I would look at how much income you need in retirement to live the lifestyle you expect. It could be that you are already there, or it could be that you need to save a bunch more. It's obvious that if you wanted to live on 50 to 75K a year, you are almost done. If you want a few 100K a year then continue on your course.[/quote]

* I don't need much, because I am a low maintenance happy person. The things I enjoy doing do not cost much money. I play piano (no cost). I go jogging/running (minimal cost), I am an photographer (no cost), I mow my own lawn, I occasionally cut my own hair (yes I am still a handsome guy), I do not play golf or belong to a country club. Whatever I want, I buy but I do not have a lot of needs or wants.
ofcmetz wrote:
ilovepiano wrote:Nope.

What do you bogleheaders think about aggressively increasing deferral compensation in this situation (I can defer up to 100% of my salary). Seems like a win win to me.

CoAndy wrote:It seems to me like you could retire earlier than your stated goal of age 50. Any interest in doing that?
Bacchus01
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by Bacchus01 »

How are you living in $60K a year? I'm very curious on this.

My income and age is similar to yours, but net worth is just over half.

With 3 kids our annual living expense is about $25k per person in our house, or $125K per year. We live modestly. That does include two houses and two mortgages but those total about $25K a year for mortgage, so brings us down to $20K/person per year.

As for your question, I see no reason you couldn't retire by 50. I have a goal of $10M them out. You should be there easily by 50 given your savings rate and modest return scenarios.
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by Lafder »

Welcome!

As far as networth to expenses, you are doing amazing!

But to get the most from this forum, consider posting all of your holdings (company name can be left off, just say company stock for more anonymity) in this format viewtopic.php?f=1&t=6212

It is likely you can optimize the holdings you do have and folks here can help with that, to ensure you can continue to save and grow your net worth, and retire when you want. Why will your expenses double in retirement ?

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ilovepiano
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by ilovepiano »

No car payment (3 vehicles/all paid in cash)
No student loans (paid off 3 years ago)
No home mortgage (paid off recently)
Off the top of my head, some monthly expenses all approx- cable/internet (60), water/sewage-100, food ?400, energy 100, gas ?300, cell phone 100.
I am a DIY person also, I recently replaced my car brakes (brake pads on amazon cost $30), when my garage door torsion spring broke I replaced it for about $30, when my toilet wax ring started to leak I replaced it (wax ring costs about 7 dollars from home depot), also installed a different toilet, and replaced my gas range. I don't buy clothes since I have a closet full of clothes. I don't pay for lawn service, mowing my lawn takes me about 30 minutes every 1-2 weeks. I don't think even if I tried I could spend 10K a month.
Yes we have done extensive traveling (Europe, asia etc). I have an iphone, ipad, apple watch. Today was my day off, I gave myself a haircut and had a delicious peanut butter and jelly sandwich for lunch.
Bacchus01 wrote:How are you living in $60K a year? I'm very curious on this.

My income and age is similar to yours, but net worth is just over half.

With 3 kids our annual living expense is about $25k per person in our house, or $125K per year. We live modestly. That does include two houses and two mortgages but those total about $25K a year for mortgage, so brings us down to $20K/person per year.

As for your question, I see no reason you couldn't retire by 50. I have a goal of $10M them out. You should be there easily by 50 given your savings rate and modest return scenarios.
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by ilovepiano »

I would but it's unnecessary. Majority of funds are in index funds. I have a stock portfolio also, blue chip companies.
Lafder wrote:Welcome!

As far as networth to expenses, you are doing amazing!

But to get the most from this forum, consider posting all of your holdings (company name can be left off, just say company stock for more anonymity) in this format viewtopic.php?f=1&t=6212

It is likely you can optimize the holdings you do have and folks here can help with that, to ensure you can continue to save and grow your net worth, and retire when you want. Why will your expenses double in retirement ?

lafder
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by ieee488 »

ilovepiano wrote:I would but it's unnecessary. Majority of funds are in index funds. I have a stock portfolio also, blue chip companies.
I am not sure what is the real purpose of your original post since answers to questions asked are deemed "unnecessary".
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by nukewerker »

So what do you do to make that kind of money?
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by dubsem »

you'll be fine. keep it up.
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by HomerJ »

toto238 wrote:There is literally no way to calculate this that doesn't come out to "you're doing fantastic".
This.

Good job, OP. Is there a question here in this thread that you want answered?
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by zfaux »

Brake pads? Now I'm sure OP is trolling...
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by new2bogle »

OP, I think you are not doing well.
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by ilovepiano »

:confused why? It's not too hard to do. I know some other physicians in my group who do their own car maintenance also.
Sorry about the last "unnecessary" post, that didn't come out the way I intended. Don't want to bore you with what funds I have. Most are Spartan 500, vanguard total stock etc.
zfaux wrote:Brake pads? Now I'm sure OP is trolling...
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Re: How Am I doing ? (39 y/o, NW- 3.5 mil)

Post by LadyGeek »

I removed an off-topic post. This thread was reopened was to let the OP reply to comments, with the expectation was that he would be obtaining advice on his situation.

This is not a one-way conversation. In light of the fact that no portfolio details will be forthcoming, this thread has run its course and is locked.
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