What do I need to do next?

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avp1234
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Joined: Mon Jun 24, 2013 12:27 pm

What do I need to do next?

Post by avp1234 » Tue Sep 12, 2017 12:17 am

Hi,
I just went back and looked at my first post about 4 years ago. When I posted that I was feeling really far behind for my age (44). Basically I had an emergency fund, a 457b, and my husband had an IRA that all 3 accounts combined equaled around $100,000. See why I felt panicky behind in our savings future :( I noticed in that post I had omitted I do have a vested state pension. Our house assesses around 275000 and at the time we owed $60,000.

So, today, 4 years later I did a quick look to compare. I started maxing contributions and opened myself a Roth IRA. Our retirement accounts are about $250,000. We will make our last payment on our house next month. (Yay) We started sending more to the mortgage to get that off of us. I don't count my house in my retirement since it's our forever home, not something we would ever sell. I need 4 more yrs. with the state to have my 30 yrs in and I can draw my pension early.

So, here I am still feeling behind. A little better, but not great. What do we need to do next? I know in a couple of years when I turn 50 i can contribute more to my 457 but that doesn't help now. We should be able after next month to save around another $1500, since we won't have a house payment. If you were me, what would you do with that? Stocks are high, but the only place to put that money is in the market if I want to get ahead. Is there a better plan? What can I do to get our savings up there? We are not big spenders at all, but I will say we do travel a couple of times a year and I don't want to give that up. Life is short. Where do I go next with this?

Also, forgot to add, I work in a political office and election yr is coming up. I have a retiring boss, so hoping whoever wins will keep me (they don't have to), or that will really throw a loop in our plans. I couldn't draw any retirement monies until i'm 60 and I would much rather be able to draw at 52. So I really need 4 more to get 30 in now. It's so stressful when your job is on the line! Anyway, any and all thoughts or suggestions would be appreciated. If you need more info., let me know.

mega317
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Re: What do I need to do next?

Post by mega317 » Tue Sep 12, 2017 1:45 am

It sounds like you're doing great. Congrats on paying off the house and committing to increasing savings.
avp1234 wrote:
Tue Sep 12, 2017 12:17 am
Stocks are high
How do you know? They may never go lower. Don't use current prices to determine your long-term plan.
the only place to put that money is in the market if I want to get ahead
Be careful with this attitude. With increased potential gains comes increased risk. You sound like you may not be in the best position to take on risk right now.
What can I do to get our savings up there? We are not big spenders at all, but I will say we do travel a couple of times a year and I don't want to give that up. Life is short.
The options are very simple: increase income, or decrease spending. It sounds like you're not willing to do the latter (which could be a reasonable decision given your "life is short" philosophy), so come up with ways to do the former if you're not happy with the current trajectory. If you lose your current job after the election will you be able to get other work?
around another $1500
This raised a small red flag for me. I would expect you to be able to save exactly the mortgage payment more, unless you are going to increase your spending. Can you clarify?

Mudpuppy
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Re: What do I need to do next?

Post by Mudpuppy » Tue Sep 12, 2017 12:48 pm

I agree that you're doing great, and much better than the average American at saving for retirement.

As for your question about where to save the former house payment, I see from your prior post that your husband is self-employed. Perhaps those more versed on the retirement options for the self-employed could let you know if there are unused avenues there for savings. He probably has more options than just putting $5500/year into a traditional IRA.

There is also no requirement that you just go all-in on the stock market in taxable savings. While stocks are more tax-efficient in taxable savings, you can change your asset allocation in the 457 plan and IRAs to hold more bonds and fixed income funds to balance out your overall asset allocation between the accounts.

avp1234
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Joined: Mon Jun 24, 2013 12:27 pm

Re: What do I need to do next?

Post by avp1234 » Wed Sep 13, 2017 11:10 pm

Thanks for replying.

The $1500 would be what we were paying towards our house plus some. I know I need to save at least this to keep moving forward. If I keep my job after next Sept., that will give me 4 more years and I will have my 30 yrs and hopefully get ahead. As far as my ability to get another job if I don't, well I'm honestly not sure what I would do. I work in the Register's office in our county and have since I was 21. One of the reasons we did focus on paying off our house is because my husband is self-employed and while his business has done well, you just never know.

I'm thinking about opening a taxable account with Vanguard, but not sure what to put the $1500 in. Right now our IRA's are at Fidelity. We may be able to buckle down and save more, but we already save my salary after what we invest in a reg. savings acct. Anyway, this is somewhat my plan. Just trying to keep moving forward.

avp1234
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Re: What do I need to do next?

Post by avp1234 » Wed Sep 13, 2017 11:13 pm

I forgot to add, as I mentioned earlier, I don't count my house since it isn't liquid. I also have a state pension, not really sure how to include that.

CantPassAgain
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Re: What do I need to do next?

Post by CantPassAgain » Thu Sep 14, 2017 9:14 am

Congrats OP for making good savings progress in 4 short years.

It sounds like you have a lot going on! It's difficult to make suggestions when there are little bits of info here and there in different posts, and a few blanks that still need to be filled in. When you have time, it would probably be worthwhile to sit down and map out everything you have and in what type of accounts. Then post a comprehensive overview of your situation using the format in the link here: viewtopic.php?f=1&t=6212

When folks can see the big picture you will probably get many more quality suggestions for not only things that you should be doing next, but also optimizing things you are doing already.

bloom2708
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Re: What do I need to do next?

Post by bloom2708 » Thu Sep 14, 2017 9:24 am

avp1234 wrote:
Wed Sep 13, 2017 11:13 pm
I forgot to add, as I mentioned earlier, I don't count my house since it isn't liquid. I also have a state pension, not really sure how to include that.
How much will your pension be a different age levels? Is it adjusted for inflation? Do you get to maintain healthcare benefits?

If your pension is $50k/year and your expenses are $40k/year, then you will be sitting in pretty good shape.

Will you or your husband get Social Security? If so, then you have the bridge years between when you retire and 67 or 70 (or whatever year you take SS).

Say your pension is $50k and your husband will get $25k in SS (at age 67) and your spending is $60k/year. You would need to withdraw funds from your portfolio or keep working part time to make up the difference.

I think you will be just fine. Feeling "behind" doesn't help much. You are here. Save as much as you can and control spending. Healthcare until Medicare and spending are the two major factors that come into play.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead | | Want to buy something? Watch this first: https://vimeo.com/41152287

Lafder
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Re: What do I need to do next?

Post by Lafder » Thu Sep 14, 2017 10:18 am

Congrats on being so close to the 30 years you need for your pension ! Hard to believe they would let you go after so many years. Don't borrow trouble and worry about that now. Deal with job loss IF it happens. If you lost the current job, it would be worth finding any job in the same system to top off the years of contribution to that pension system. :)

Congrats on being able to pay off your house so young. We are average age 51 and have not paid off ours............ This will greatly decrease the monthly income you need to live forever in your forever home.

Where to put the extra taxable investments? Be sure you have a comfortable enough cash buffer. I keep my emergency fund in our basic checking account so I always have a few months of expenses if needed.

I really believe in a 3 fund portfolio.

Total Stock Market
Total International Stock Market
Total Bond Market.

But since this is a taxable account, there are some more tax advantaged bond funds than the total bond market. Others can help you come up with them. The differences may be slight.

The simplicity of the three fund portfolio is discussed in detail here. Probably every question you can think of will be answered.

viewtopic.php?f=10&t=88005

If you do not want to mess with 3 funds you could consider one of the "tax advantaged" funds at Vanguard for your taxable investments. They are designed to minimize taxes due in taxable accounts by purposely selling some holdings at a loss to cancel gains by the end of the year. They do it for you. Here is a link. Note these funds minimize taxes, so they do not necessarily maximize growth. SO it depends on if minimal taxes is your bottom line or if you prefer growth with taxes :)

Ha, I went to find a link on the VG website and found this on the BH site with more discussion. You can also look at the description on Vanguard's website. https://www.bogleheads.org/wiki/Tax-man ... comparison

The other thing I think is worth considering are the all in one funds such as the Life Strategy funds or target date retirement funds at VG. They will maintain a combo of basically the 3 fund portfolio plus International bonds. They will rebalance for you. The Target Date retirement funds will increase bonds over the years. They are nice invest and forget funds.

A relative gave my kids $ and I put their money in Life Strategy Moderate growth since the goal was to have it available for travel in less than 10 years. So that was the simple option I chose. If they ask for the money, I may just give them $from my savings and keep the Life Strategy fund for myself. (They were kids and I made and kept the account in my name. The money was given to me for them)

If you really can not decide what to do with this extra $, you can put it in a savings account. But the interest will not even keep up with inflation.

I believe the stock market will on average go up over the years or I would not invest. If you are worried about the market, buffer the risk by having a higher % in bonds. Then if the market indeed has it's next huge crash, whenever that will be, you will have less of a drop and can rebalance back to your set AA. I believe the best way to moderate risk is with a higher % stocks, in a 3 fund portfolio or all in one fund with more bonds. For example the Vanguard Tax Managed Balanced fund is about 50% stock and 50% bonds.

Wonderful dilemma to have to have to plan where to save your "extra" money !

Best wishes,
lafder

pkcrafter
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Re: What do I need to do next?

Post by pkcrafter » Thu Sep 14, 2017 11:04 am

avp, what is your current savings rate (% of income) and asset allocation?

Does your husband have a small business investment plan?

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

ThrustVectoring
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Re: What do I need to do next?

Post by ThrustVectoring » Thu Sep 14, 2017 2:29 pm

avp1234 wrote:
Wed Sep 13, 2017 11:13 pm
I forgot to add, as I mentioned earlier, I don't count my house since it isn't liquid. I also have a state pension, not really sure how to include that.
The simplest way to count things like those is to have it reduce the amount of income you need to draw from your retirement portfolio. If you didn't own your house, you'd need to make $1500/mo or whatever rent/mortgage payments, which means your retirement portfolio has to be bigger to support that draw. Similarly, with the pension - if you didn't have the $1000/mo (or whatever it is) state pension, you'd need to withdraw another $1000/mo to pay for your retirement expenses.

In short, your retirement savings should cover your net expenses after social security / pension / etc. If your pension will cover half your expenses, your retirement "number' gets halved.

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Meg77
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Re: What do I need to do next?

Post by Meg77 » Thu Sep 14, 2017 2:50 pm

In just four short years you paid off your $60K mortgage and added $150K to your retirement accounts. I'd say that is pretty great progress! And you are on track to have a fully vested pension in 4 years. And you are only 52!!

Here is my advice:
1. Pat yourself on the back and quit feeling "behind." You are winning the game in every sense, especially when you compare yourself to the average American - much less the average person worldwide. If you and your husband both lost your jobs tomorrow somehow you would still be fine and make it work. You have a net worth of over $500K, and even if you never save another dollar your investments should double in value approximately every 10 years if you don't touch them.

2. Don't plan to draw your pension early unless 1) you really want to retire and also 2) you really can't think of any other work you could do that you might find gratifying and also 3) your pension covers close to 100% of your expenses. All three need to be true for you to draw it early, assuming that drawing it early means taking reduced payments than you could get at age 60+.

3. With the extra $1500 a month I would boost your emergency fund to $25,000 if it's not there already, or to 1 year of expenses - whichever is lower. This will give you peace of mind and flexibility even if you're laid off. After that just invest it in taxable accounts according to your target asset allocation. If all your IRAs are at Fidelity though, I'd open the taxable account there too. They are a fine alternative to VG, fees are similar, and it's not worth getting another set of statements and having another website login etc in my view. Plus you'll be able to see charts of all your investments in one place which can be neat - and makes rebalancing easier.

4. Think of what you would love to do with the next 40 years of your life. You could easily live that long. Do you really want to retire in 4 years? Sounds like you've been at this particular job long enough so I'm with you there, but how will you spend your days? Maybe start experimenting with hobbies or activities you envision doing to see if you actually like them. Maybe research other places you might want to live or other jobs (even if you are paid much less) that you might want to do. Could be something self-employed, could be something philanthropic, could be something just to stay social like working at the bookstore or coaching girls soccer or substitute teaching.

Congrats again on your progress! :sharebeer
"An investment in knowledge pays the best interest." - Benjamin Franklin

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sergeant
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Re: What do I need to do next?

Post by sergeant » Thu Sep 14, 2017 5:44 pm

I'm betting your 457b allows catch up contributions. If you are within three years of retirement age, which you are, you can double up the contribution amount. I think next year that will be $37,000. The good thing is you don't have to actually retire after the three years of double contributions, you just have to go back to the maximum contribution amount. Me and DW took advantage of this and it really accelerated our savings.
Lincoln 3 EOW!

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