:UPDATED: New to the board, Looking for review/ advice/ guidance

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
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Topic Author
rage_phish
Posts: 194
Joined: Thu Jan 31, 2019 4:27 pm

:UPDATED: New to the board, Looking for review/ advice/ guidance

Post by rage_phish »

Hi folks. it's been about 2 years since I first posted in here looking for advice and guidance. And I'd like to do that again with updated numbers. As with before, any advice and guidance would be appreciated. (updated numbers in bold)

The biggest change in our finances has been the addition of a second kid. Our largest expense right now is daycare at $30k/ year



Income:
Him: $83,000 + 10% bonus / 85,490 + 10% bonus (raise coming in Feb
Her: Currently $86,000 / %98,000, goes to $103k in July, then $106k in August

Emergency Fund: 8-10 months funded / 12 months funded, cash in HYSA
Debt: Mortgage: $433,145 @ 4% (no other debts) / $420,000 @ 2.75 (no other debt)

Filing status: Married, jointly

State California
Age: Him 35/ Her 35 / Him 37/ Her 37
Desired Allocation: recently become a big fan of the 3 fund portfolio concept. 75% US stock/ 20% International stock/ 5% bonds / I have gotten away from this a bit over the last two years and trended more towards a 1 fund approach

Him[/b]: $66,000 in retirement accounts /$142,895

401k (6% company match, contribute 12%, 6% company match): $12,500 / $57,943, contribute 10%, 6% company match
34% in 2060 fund (.55 expense), 33% 2055 fund (.55 expense), 33% US large Co Index (.017 expense) / 80% US Large Co Index (.0143% exp),7% Small Cap Eqty Index (.0217% exp), 6% Intl Company Index (.0802 exp), 6% Company Stock Fund (.0033% Exp)

IRA: $31,000 / $42,895
Fidelity Total Market Index Fund FSKAX .015 exp ratio - 75% / 77%
Fidelity Total International Index Fund FTIHX .06 exp ratio - 20% / 18%
Fidelity U. S. Bond Index Fund FXNAX .025 exp ratio - 5% / 4%


ROTH – (just started $100 deposit per month) - $23,000 / $41,642, maxed out in 2020, and will again in 2021
Fidelity Zero Total Market Index Fund FSKAX .0% exp ratio - 75% / 78%
Fidelity Zero Total International Index Fund FTIHX .0% exp ratio- 20% / 15%
Fidelity Zero U. S. Bond Index Fund FXNAX .0% exp ratio - 5% / 3%

- As of last year my employer started annual RSO grants. currently have $5,324, with 1/3 of that vesting in march (with the other 2/3's vesting in the next 2 subsequent years, and I will again be granted a other 1/3 each year as well


Her:
Rollover: $4,500 / $6,170
CHARLES SCHWAB US MC ETF SCHM .05 exp ration- 28% / Schwab Total Stock Market .03 Exp Ratio - 87%
SCHWAB US LARGE CAP Growth SCHG .04 exp ratio - 44% / Schwab Intl Index Fund .06 exp ration - 9%
SCHWAB US SMALL CAP SCHA .05 exp ratio - 28% / Schwab US aggregate Bond Fund .04 Exp Ratio - 4%

Roth - just started $100 deposit per month): $18,000 / 3$32,519: we maxed this out for 2020, will do the same for 2021
VANGUARD TOTAL STOCK. VTI .04 exp ratio- 46.5% / Schwab Total Stock Mkt Fund - 87%
SCHWAB US LARGE CAP SCHX .03 exp ratio - 32.5% / Schwab Intl Index Fund .06 exp ration - 9%
SCHWAB INTERNATIONAL. Equity SCHF .06 exp ratio - 9% / Schwab US aggregate Bond Fund .04 Exp Ratio - 4%
SCHWAB EMERGING MARKETS SCHE .13 exp ratio - 12%

Deferred Compensation 457: $21,000 / 38,484 - monthly Contribution $350 (just bumped this up to $450) & employer matches $150
Hartford Midcap HLS fund .95 exp ratio – 26% / Fidelity 500 Index .02 Exp Ratio - 90%
Vanguard Institutional Index .04 exp ratio – 26%/ FIdelity Global Ex US Index .06 Exp Ratio - 10%
Vanguard Small Cap Index .17 exp ratio - 25%
Vanguard Total International Stock index .017 exp ratio – 23%

Pension $30,000 / $63,000




Questions:

1. how have we progressed over the last 2 years?
2. Major changes we should be making? Issues we should be addressing?

Using the 4% rule, 25 times expenses and compound interest calculators, i feel that by the time we're 60 we should be in fairly good shape with $2.5-3 million, but that feels a little too easy to be honest, and I'm hoping I am not just viewing things through rose colored glasses
Last edited by rage_phish on Tue Jan 05, 2021 6:37 pm, edited 3 times in total.
btenny
Posts: 5511
Joined: Sun Oct 07, 2007 6:47 pm

Re: New to the board, Looking for review/ advice/ guidance

Post by btenny »

So to summarize you are mid 30s and have $166K or so saved and invested. You live in a HCOL area and make $170K +-. You are doing OK. Not great but not bad either. I think you are limited by living costs in a HCOL area so you probably cannot invest very much annually at your current incomes.

I think you have a good handle on you investments. Keep it up. How much do you have saved as an emergency fund? Where do you have that money invested? Is it included in the amounts show already?

I would change his 401K investments and sell the 2055 and 2060 funds and try to invest the money in lower cost funds. Same thing for the Differed Compensation plan. Get rid of the Hartford Mid cap fund and move the money some sort of low cost Vanguard US fund.

Good Luck and keep saving.
User avatar
CyclingDuo
Posts: 3913
Joined: Fri Jan 06, 2017 9:07 am

Re: New to the board, Looking for review/ advice/ guidance

Post by CyclingDuo »

rage_phish wrote: Mon Feb 04, 2019 5:38 pm Hi Everyone, I am fairly new to this board and have been poking around and reading for the last week, so please let me know what info I missed/ areas that need to be corrected (I did my best to follow the requested format)

My wife and I are novices at best when it comes to retirement planning (but trying to get better!). We feel we do well saving (but with the high COLA of the SF bay area & 1 kid in daycare (and another on the way) it is hard to save everywhere we would like too, but at the same time feel our retirement savings are lacking where they need to be. And now that we have a well funded emergency fund, we want to really concentrate on our retirement savings

Income: (both of these should be increasing with raises in the next month)
Him: $83,000 + 10% bonus
Her: Currently $86,000

Emergency Fund: 8-10 months funded
Debt: Mortgage: $433,145 @ 4% (no other debts)

Filing status: Married, jointly

State California
Age: Him 35/ Her 35
Desired Allocation: recently become a big fan of the 3 fund portfolio concept. 75% US stock/ 20% International stock/ 5% bonds

Him: $66,000 in retirement accounts
401k (6% company match, contribute 12%, 6% to roth 401k, 6% to traditional): $12,500
34% in 2060 fund (.55 expense), 33% 2055 fund (.55 expense), 33% US large Co Index (.017 expense)

IRA: $31,000
Fidelity Total Market Index Fund FSKAX .015 exp ratio - 75%
Fidelity Total International Index Fund FTIHX .06 exp ratio - 20%
Fidelity U. S. Bond Index Fund FXNAX .025 exp ratio - 5%


ROTH – (just started $100 deposit per month) - $23,000
Fidelity Total Market Index Fund FSKAX .015 exp ratio - 75%
Fidelity Total International Index Fund FTIHX .06 exp ratio- 20%
Fidelity U. S. Bond Index Fund FXNAX .025 exp ratio - 5%




Her:
Rollover: $4,500
CHARLES SCHWAB US MC ETF SCHM .05 exp ration- 28%
SCHWAB US LARGE CAP Growth SCHG .04 exp ratio - 44%
SCHWAB US SMALL CAP SCHA .05 exp ratio - 28%

Roth: $18,000
VANGUARD TOTAL STOCK. VTI .04 exp ratio- 46.5%
SCHWAB US LARGE CAP SCHX .03 exp ratio - 32.5%
SCHWAB INTERNATIONAL. Equity SCHF .06 exp ratio - 9%
SCHWAB EMERGING MARKETS SCHE .13 exp ratio - 12%

Deferred Compensation: $21,000
Hartford Midcap HLS fund .95 exp ratio – 26%
Vanguard Institutional Index .04 exp ratio – 26%
Vanguard Small Cap Index .17 exp ratio - 25%
Vanguard Total International Stock index .017 exp ratio – 23%

Pension $30,000 (in all honesty we don’t know how this works)




Questions:

1. How are we doing? are we as far behind as we feel for our age?
2. Major changes we should be making? Issues we should be addressing? My wife and I both feel like we’re behind where we should be in regards
to retirement savings at this point in time.
3. Should we be maxing out company matches, then maxing our roths, and then putting what else we can into our work retirement accounts?
Relax, you are doing great for your ages and have plenty of time to "catch up". We would suggest that you find out everything you can about your pension. Are you contributing a mandatory amount with each paycheck for it? Is there an employer match for the pension? What are the percentages being contributed? How long is the vesting period? Who manages the pension?

Goal one was to have around 1x your combined salary saved by age 30 in retirement accounts; 2x your combined salary by age 35; 3x your combined salary by age 40. And on and on...

https://www.cnbc.com/2018/09/20/david-b ... y-age.html

https://www.fidelity.com/viewpoints/ret ... -to-retire

Those assumptions from Fidelity are based on retiring at FRA (67) and receiving Social Security. If you will also have a pension, that is another leg to the income stream stool for retirement - which is good - and could very well alter those multiples to a lower number! [Three legged stool being: pension, social security, risk portfolio.]

When living in a HCOL area, and with the price of real estate - it may not be feasible to hit some of those multiples of your salary being saved along the way, but don't let that discourage you. Keep socking away as much as you can as the investments will turn into the "snowball effect" thanks to time & compounding.

https://www.suredividend.com/snowball-effect/

The target goal from the Fidelity multiples chart would be to have $532K by age 40 saved in your combined retirement accounts. If you currently have $166K, that means you would need to sock away an additional $366K between now and age 40 to reach the multiple of 3x salary (not counting compounding). With compounding, it could be less that you need to save than an additional $366K. But let's run the equation disregarding compounding for this exercise. With your current expenses, we would imagine saving $70-$73K per year the next 5 years might make things tight with the mortgage, day care, and household expenses. What are your annual expenses? If you keep a budget and track what you spend, it is good to know the cash flow of what comes in vs. what goes out to see how much flexibility you have in your savings rate.

Regardless, that multiple of 3x your combined salary by age 40 would/could be a goal whether you make it there or not. It's not a must by any means because the Fidelity chart assumes that one will retire at 67, have social security and that is not everyone's scenario. Your pension will alter that in your favor. Often times, as salaries increase and careers progress - you can use your dual income to stretch the catch up goals out quite a few years. There will indeed be some good progress made over the next decade or two with the combination of the power of time/compounding (snowball effect), increased income, and increased savings while avoiding lifestyle creep.

Find out as much as you can about that pension. Also, put together a budget to see how much you could realistically sock away in tax advantaged accounts compared to what you are saving now.

Amounts needed to be saved if no compounding took place to hit a 3x salary multiple by age 40.

15% of your gross income saved is $26595
20% of your gross income saved is $35460
25% of your gross income saved is $44325
30% of your gross income saved is $53190
35% of your gross income saved is $62055
40% of your gross incomes saved is $70920*

(*This would be the amount needed to be saved each year to hit that multiple of 3x your combined income by age 40.)

If you both maxed out your 401k's at $19K each, plus your Roth IRA's at $6K each - that would total $50,000. Add the company match, find out what is going towards the pension from the salary and the match to see if that 40% goal is even doable.

All of that being said, you are doing great. You don't want to over-save to the point of not meeting your household expenses and enjoying yourselves a bit from time to time at your current ages.
Last edited by CyclingDuo on Mon Feb 04, 2019 9:41 pm, edited 2 times in total.
"Save like a pessimist, invest like an optimist." - Morgan Housel
HEDGEFUNDIE
Posts: 4801
Joined: Sun Oct 22, 2017 2:06 pm

Re: New to the board, Looking for review/ advice/ guidance

Post by HEDGEFUNDIE »

How much is your house worth?
Topic Author
rage_phish
Posts: 194
Joined: Thu Jan 31, 2019 4:27 pm

Re: New to the board, Looking for review/ advice/ guidance

Post by rage_phish »

btenny wrote: Mon Feb 04, 2019 8:14 pm So to summarize you are mid 30s and have $166K or so saved and invested. You live in a HCOL area and make $170K +-. You are doing OK. Not great but not bad either. I think you are limited by living costs in a HCOL area so you probably cannot invest very much annually at your current incomes.

I think you have a good handle on you investments. Keep it up. How much do you have saved as an emergency fund? Where do you have that money invested? Is it included in the amounts show already?

I would change his 401K investments and sell the 2055 and 2060 funds and try to invest the money in lower cost funds. Same thing for the Differed Compensation plan. Get rid of the Hartford Mid cap fund and move the money some sort of low cost Vanguard US fund.

Good Luck and keep saving.

Thanks for the reply

Our emergency fund is $80k and at sinchrony in a high yield saving account (2.2% I believe)


I have seen on here frequently that target date funds are generally frowned on, so I’ll make those changes for sure

Thanks!
Topic Author
rage_phish
Posts: 194
Joined: Thu Jan 31, 2019 4:27 pm

Re: New to the board, Looking for review/ advice/ guidance

Post by rage_phish »

HEDGEFUNDIE wrote: Mon Feb 04, 2019 9:36 pm How much is your house worth?

Paid $580k with 20% down payment in 2015

Zillow value currently says valued at $650k (though I take that with a large grain of salt)
Last edited by rage_phish on Mon Feb 04, 2019 9:46 pm, edited 1 time in total.
Topic Author
rage_phish
Posts: 194
Joined: Thu Jan 31, 2019 4:27 pm

Re: New to the board, Looking for review/ advice/ guidance

Post by rage_phish »

CyclingDuo wrote: Mon Feb 04, 2019 9:34 pm
rage_phish wrote: Mon Feb 04, 2019 5:38 pm Hi Everyone, I am fairly new to this board and have been poking around and reading for the last week, so please let me know what info I missed/ areas that need to be corrected (I did my best to follow the requested format)

My wife and I are novices at best when it comes to retirement planning (but trying to get better!). We feel we do well saving (but with the high COLA of the SF bay area & 1 kid in daycare (and another on the way) it is hard to save everywhere we would like too, but at the same time feel our retirement savings are lacking where they need to be. And now that we have a well funded emergency fund, we want to really concentrate on our retirement savings

Income: (both of these should be increasing with raises in the next month)
Him: $83,000 + 10% bonus
Her: Currently $86,000

Emergency Fund: 8-10 months funded
Debt: Mortgage: $433,145 @ 4% (no other debts)

Filing status: Married, jointly

State California
Age: Him 35/ Her 35
Desired Allocation: recently become a big fan of the 3 fund portfolio concept. 75% US stock/ 20% International stock/ 5% bonds

Him: $66,000 in retirement accounts
401k (6% company match, contribute 12%, 6% to roth 401k, 6% to traditional): $12,500
34% in 2060 fund (.55 expense), 33% 2055 fund (.55 expense), 33% US large Co Index (.017 expense)

IRA: $31,000
Fidelity Total Market Index Fund FSKAX .015 exp ratio - 75%
Fidelity Total International Index Fund FTIHX .06 exp ratio - 20%
Fidelity U. S. Bond Index Fund FXNAX .025 exp ratio - 5%


ROTH – (just started $100 deposit per month) - $23,000
Fidelity Total Market Index Fund FSKAX .015 exp ratio - 75%
Fidelity Total International Index Fund FTIHX .06 exp ratio- 20%
Fidelity U. S. Bond Index Fund FXNAX .025 exp ratio - 5%




Her:
Rollover: $4,500
CHARLES SCHWAB US MC ETF SCHM .05 exp ration- 28%
SCHWAB US LARGE CAP Growth SCHG .04 exp ratio - 44%
SCHWAB US SMALL CAP SCHA .05 exp ratio - 28%

Roth: $18,000
VANGUARD TOTAL STOCK. VTI .04 exp ratio- 46.5%
SCHWAB US LARGE CAP SCHX .03 exp ratio - 32.5%
SCHWAB INTERNATIONAL. Equity SCHF .06 exp ratio - 9%
SCHWAB EMERGING MARKETS SCHE .13 exp ratio - 12%

Deferred Compensation: $21,000
Hartford Midcap HLS fund .95 exp ratio – 26%
Vanguard Institutional Index .04 exp ratio – 26%
Vanguard Small Cap Index .17 exp ratio - 25%
Vanguard Total International Stock index .017 exp ratio – 23%

Pension $30,000 (in all honesty we don’t know how this works)




Questions:

1. How are we doing? are we as far behind as we feel for our age?
2. Major changes we should be making? Issues we should be addressing? My wife and I both feel like we’re behind where we should be in regards
to retirement savings at this point in time.
3. Should we be maxing out company matches, then maxing our roths, and then putting what else we can into our work retirement accounts?
Relax, you are doing great for your ages and have plenty of time to "catch up". We would suggest that you find out everything you can about your pension. Are you contributing a mandatory amount with each paycheck for it? Is there an employer match for the pension? What are the percentages being contributed? How long is the vesting period? Who manages the pension?

Goal one was to have around 1x your combined salary saved by age 30 in retirement accounts; 2x your combined salary by age 35; 3x your combined salary by age 40. And on and on...

https://www.cnbc.com/2018/09/20/david-b ... y-age.html

https://www.fidelity.com/viewpoints/ret ... -to-retire

Those assumptions from Fidelity are based on retiring at FRA (67) and receiving Social Security. If you will also have a pension, that is another leg to the income stream stool for retirement - which is good - and could very well alter those multiples to a lower number! [Three legged stool being: pension, social security, risk portfolio.]

When living in a HCOL area, and with the price of real estate - it may not be feasible to hit some of those multiples of your salary being saved along the way, but don't let that discourage you. Keep socking away as much as you can as the investments will turn into the "snowball effect" thanks to time & compounding.

https://www.suredividend.com/snowball-effect/

The target goal from the Fidelity multiples chart would be to have $532K by age 40 saved in your combined retirement accounts. If you currently have $166K, that means you would need to sock away an additional $366K between now and age 40 to reach the multiple of 3x salary (not counting compounding). With compounding, it could be less that you need to save than an additional $366K. But let's run the equation disregarding compounding for this exercise. With your current expenses, we would imagine saving $70-$73K per year the next 5 years might make things tight with the mortgage, day care, and household expenses. What are your annual expenses? If you keep a budget and track what you spend, it is good to know the cash flow of what comes in vs. what goes out to see how much flexibility you have in your savings rate.

Regardless, that multiple of 3x your combined salary by age 40 would/could be a goal whether you make it there or not. It's not a must by any means because the Fidelity chart assumes that one will retire at 67, have social security and that is not everyone's scenario. Your pension will alter that in your favor. Often times, as salaries increase and careers progress - you can use your dual income to stretch the catch up goals out quite a few years. There will indeed be some good progress made over the next decade or two with the combination of the power of time/compounding (snowball effect), increased income, and increased savings while avoiding lifestyle creep.

Find out as much as you can about that pension. Also, put together a budget to see how much you could realistically sock away in tax advantaged accounts compared to what you are saving now.

Amounts needed to be saved if no compounding took place to hit a 3x salary multiple by age 40.

15% of your gross income saved is $26595
20% of your gross income saved is $35460
25% of your gross income saved is $44325
30% of your gross income saved is $53190
35% of your gross income saved is $62055
40% of your gross incomes saved is $70920*

(*This would be the amount needed to be saved each year to hit that multiple of 3x your combined income by age 40.)

If you both maxed out your 401k's at $19K each, plus your Roth IRA's at $6K each - that would total $50,000. Add the company match, find out what is going towards the pension from the salary and the match to see if that 40% goal is even doable.

All of that being said, you are doing great. You don't want to over-save to the point of not meeting your household expenses and enjoying yourselves a bit from time to time at your current ages.
Thanks for your reply. Lots to address here. I’ll need to dig up some info (we do keep a budget, I know our monthly expenses, and I’ll get some additional pension info from my wife)

Thanks!
Thecallofduty
Posts: 90
Joined: Sat Jan 19, 2019 10:59 am

Re: New to the board, Looking for review/ advice/ guidance

Post by Thecallofduty »

Thanks for the reply

Our emergency fund is $80k and at sinchrony in a high yield saving account (2.2% I believe)


I have seen on here frequently that target date funds are generally frowned on, so I’ll make those changes for sure

Thanks!
[/quote]



- That is a nice Emergency fund and you have it placed somewhere appropriate.
- target funds are ok, its just your expense ratio is higher than one would want for investing for next 20-30 years especially when you have other really good low expense options available.
- Try to view all the accounts as one single investment portfolio then choose investments in each account based on percentage of a whole. There are some overlaps in all the accounts and I think you could really simplify it.
-thecallofduty
Topic Author
rage_phish
Posts: 194
Joined: Thu Jan 31, 2019 4:27 pm

Re: New to the board, Looking for review/ advice/ guidance

Post by rage_phish »

CyclingDuo wrote: Mon Feb 04, 2019 9:34 pm
rage_phish wrote: Mon Feb 04, 2019 5:38 pm Hi Everyone, I am fairly new to this board and have been poking around and reading for the last week, so please let me know what info I missed/ areas that need to be corrected (I did my best to follow the requested format)

My wife and I are novices at best when it comes to retirement planning (but trying to get better!). We feel we do well saving (but with the high COLA of the SF bay area & 1 kid in daycare (and another on the way) it is hard to save everywhere we would like too, but at the same time feel our retirement savings are lacking where they need to be. And now that we have a well funded emergency fund, we want to really concentrate on our retirement savings

Income: (both of these should be increasing with raises in the next month)
Him: $83,000 + 10% bonus
Her: Currently $86,000

Emergency Fund: 8-10 months funded
Debt: Mortgage: $433,145 @ 4% (no other debts)

Filing status: Married, jointly

State California
Age: Him 35/ Her 35
Desired Allocation: recently become a big fan of the 3 fund portfolio concept. 75% US stock/ 20% International stock/ 5% bonds

Him: $66,000 in retirement accounts
401k (6% company match, contribute 12%, 6% to roth 401k, 6% to traditional): $12,500
34% in 2060 fund (.55 expense), 33% 2055 fund (.55 expense), 33% US large Co Index (.017 expense)

IRA: $31,000
Fidelity Total Market Index Fund FSKAX .015 exp ratio - 75%
Fidelity Total International Index Fund FTIHX .06 exp ratio - 20%
Fidelity U. S. Bond Index Fund FXNAX .025 exp ratio - 5%


ROTH – (just started $100 deposit per month) - $23,000
Fidelity Total Market Index Fund FSKAX .015 exp ratio - 75%
Fidelity Total International Index Fund FTIHX .06 exp ratio- 20%
Fidelity U. S. Bond Index Fund FXNAX .025 exp ratio - 5%




Her:
Rollover: $4,500
CHARLES SCHWAB US MC ETF SCHM .05 exp ration- 28%
SCHWAB US LARGE CAP Growth SCHG .04 exp ratio - 44%
SCHWAB US SMALL CAP SCHA .05 exp ratio - 28%

Roth: $18,000
VANGUARD TOTAL STOCK. VTI .04 exp ratio- 46.5%
SCHWAB US LARGE CAP SCHX .03 exp ratio - 32.5%
SCHWAB INTERNATIONAL. Equity SCHF .06 exp ratio - 9%
SCHWAB EMERGING MARKETS SCHE .13 exp ratio - 12%

Deferred Compensation: $21,000
Hartford Midcap HLS fund .95 exp ratio – 26%
Vanguard Institutional Index .04 exp ratio – 26%
Vanguard Small Cap Index .17 exp ratio - 25%
Vanguard Total International Stock index .017 exp ratio – 23%

Pension $30,000 (in all honesty we don’t know how this works)




Questions:

1. How are we doing? are we as far behind as we feel for our age?
2. Major changes we should be making? Issues we should be addressing? My wife and I both feel like we’re behind where we should be in regards
to retirement savings at this point in time.
3. Should we be maxing out company matches, then maxing our roths, and then putting what else we can into our work retirement accounts?
Relax, you are doing great for your ages and have plenty of time to "catch up". We would suggest that you find out everything you can about your pension. Are you contributing a mandatory amount with each paycheck for it? Is there an employer match for the pension? What are the percentages being contributed? How long is the vesting period? Who manages the pension?

Goal one was to have around 1x your combined salary saved by age 30 in retirement accounts; 2x your combined salary by age 35; 3x your combined salary by age 40. And on and on...

https://www.cnbc.com/2018/09/20/david-b ... y-age.html

https://www.fidelity.com/viewpoints/ret ... -to-retire

Those assumptions from Fidelity are based on retiring at FRA (67) and receiving Social Security. If you will also have a pension, that is another leg to the income stream stool for retirement - which is good - and could very well alter those multiples to a lower number! [Three legged stool being: pension, social security, risk portfolio.]

When living in a HCOL area, and with the price of real estate - it may not be feasible to hit some of those multiples of your salary being saved along the way, but don't let that discourage you. Keep socking away as much as you can as the investments will turn into the "snowball effect" thanks to time & compounding.

https://www.suredividend.com/snowball-effect/

The target goal from the Fidelity multiples chart would be to have $532K by age 40 saved in your combined retirement accounts. If you currently have $166K, that means you would need to sock away an additional $366K between now and age 40 to reach the multiple of 3x salary (not counting compounding). With compounding, it could be less that you need to save than an additional $366K. But let's run the equation disregarding compounding for this exercise. With your current expenses, we would imagine saving $70-$73K per year the next 5 years might make things tight with the mortgage, day care, and household expenses. What are your annual expenses? If you keep a budget and track what you spend, it is good to know the cash flow of what comes in vs. what goes out to see how much flexibility you have in your savings rate.

Regardless, that multiple of 3x your combined salary by age 40 would/could be a goal whether you make it there or not. It's not a must by any means because the Fidelity chart assumes that one will retire at 67, have social security and that is not everyone's scenario. Your pension will alter that in your favor. Often times, as salaries increase and careers progress - you can use your dual income to stretch the catch up goals out quite a few years. There will indeed be some good progress made over the next decade or two with the combination of the power of time/compounding (snowball effect), increased income, and increased savings while avoiding lifestyle creep.

Find out as much as you can about that pension. Also, put together a budget to see how much you could realistically sock away in tax advantaged accounts compared to what you are saving now.

Amounts needed to be saved if no compounding took place to hit a 3x salary multiple by age 40.

15% of your gross income saved is $26595
20% of your gross income saved is $35460
25% of your gross income saved is $44325
30% of your gross income saved is $53190
35% of your gross income saved is $62055
40% of your gross incomes saved is $70920*

(*This would be the amount needed to be saved each year to hit that multiple of 3x your combined income by age 40.)

If you both maxed out your 401k's at $19K each, plus your Roth IRA's at $6K each - that would total $50,000. Add the company match, find out what is going towards the pension from the salary and the match to see if that 40% goal is even doable.

All of that being said, you are doing great. You don't want to over-save to the point of not meeting your household expenses and enjoying yourselves a bit from time to time at your current ages.
in regard to the figures that state how much you should have by XX age, those are what have us always feeling like we are so far behind.

The idea of saving 40% of our income to equal that $70k annually would be awesome, but not at all doable for us..
our expenses are around $9-10k/ month

biggest expenses are:

Mortgage: $2,200 a month (plus about $7,500 in property taxes)
Day care: currently $1,025 a month, and that will more than double to more than our mortgage when our second starts day care in September
Groceries: $850/ month average (probably a lot, but we try to eat fresh and healthy and rarely ever eat out/ have food waste)
Cell phone: $194/ month (what drives me crazy about this is that i actually work for a competitor of our current cell phone company and could be getting a employee discount. but need to wait until next year to cancel when our contract expires)

other savings included:

529: $200/ month
kids savings account (high yield st synchrony): $200 biweekly (trying to build up a buffer for when day care increases)
Short term savings (high yield st synchrony): $700/ month ($175 a week) - generally used for property taxes and large surprise purchase that arise

last year (not including our retirement accounts) we saved just under $30,000, which we were really proud of and got us to our funded emergency fund. and as nice as it would to simply funnel that $30k going forward into our retirement accounts, we're about to have an additional $17,400 in day care costs annually (and thats not including all the other costs of a second kid)

we did just start funding out roth's again at $100 a month each (and we will likely split my bonus & our tax return between our two roth's this year, which i believe should give us each a little under $4k contributing this year)

sorry if im a bit all over the place here.
User avatar
Watty
Posts: 21333
Joined: Wed Oct 10, 2007 3:55 pm

Re: New to the board, Looking for review/ advice/ guidance

Post by Watty »

rage_phish wrote: Mon Feb 04, 2019 5:38 pm We feel we do well saving (but with the high COLA of the SF bay area & 1 kid in daycare (and another on the way)
rage_phish wrote: Mon Feb 04, 2019 5:38 pm Him: $83,000 + 10% bonus
Her: Currently $86,000
rage_phish wrote: Mon Feb 04, 2019 5:38 pm 2. Major changes we should be making? Issues we should be addressing? My wife and I both feel like we’re behind where we should be in regards
You are actually muddling through pretty good for being in such an expensive area but but I would think a $650K house in the Bay Area is probably pretty basic or you could have a very long commute. From what people have posted about the Bay Area I would also think that the quality of the schools could be an issue.

It was decades ago when I lived in there but the Bay Area has always been expensive. I ended up moving to a much less expensive area when I was ready to buy my first house and it worked out very well for me. One thing I saw even then was that some of my older coworkers had grown kids that were well in their 20's that were still living at home and that was not always a good situation. The problem was that the kids did not have high paying jobs and they could not afford to move out to an apartment even with roommates.

You might consider what the area will be like for your kids when they grow up and if they will be able to afford to live near you. With all the other expenses you have you may also not be able to pay a lot of their college expenses so they could also have large student loans.

I have moved around since then and I am in the Atlanta suburbs now which still has reasonable housing prices and I have a 30 year old son who is doing well and was able to afford to buy a house about ten minutes from us so we get to my son, his wife, and out two grandkids frequently. We also have some friends who have a son that is severely dyslexic and barely graduated from high school. At one point he was working at a chain muffler shop which is a good honest job but I am sure that it did not pay a lot. Even on that salary though he was able to buy a small older house in a marginal but not terrible area.

If you don't have strong family ties to the Bay Area I would take a hard look at eventually moving from the Bay Area to a less expensive area.

In probably 80% of the country you can get a really nice 3bd/3bath house in a good area for less than $300k, and often a lot less. Here is an example of what you could get in a good school district in the suburbs of Atlanta for less than $300K, but housing in a downtown or prime location would cost a lot more because of the bad commute in Atlanta.

https://www.realtor.com/realestateandho ... 61?view=qv
User avatar
CyclingDuo
Posts: 3913
Joined: Fri Jan 06, 2017 9:07 am

Re: New to the board, Looking for review/ advice/ guidance

Post by CyclingDuo »

rage_phish wrote: Tue Feb 05, 2019 2:51 pm in regard to the figures that state how much you should have by XX age, those are what have us always feeling like we are so far behind.

The idea of saving 40% of our income to equal that $70k annually would be awesome, but not at all doable for us..
our expenses are around $9-10k/ month

biggest expenses are:

Mortgage: $2,200 a month (plus about $7,500 in property taxes)
Day care: currently $1,025 a month, and that will more than double to more than our mortgage when our second starts day care in September
Groceries: $850/ month average (probably a lot, but we try to eat fresh and healthy and rarely ever eat out/ have food waste)
Cell phone: $194/ month (what drives me crazy about this is that i actually work for a competitor of our current cell phone company and could be getting a employee discount. but need to wait until next year to cancel when our contract expires)

other savings included:

529: $200/ month
kids savings account (high yield st synchrony): $200 biweekly (trying to build up a buffer for when day care increases)
Short term savings (high yield st synchrony): $700/ month ($175 a week) - generally used for property taxes and large surprise purchase that arise

last year (not including our retirement accounts) we saved just under $30,000, which we were really proud of and got us to our funded emergency fund. and as nice as it would to simply funnel that $30k going forward into our retirement accounts, we're about to have an additional $17,400 in day care costs annually (and thats not including all the other costs of a second kid)

we did just start funding out roth's again at $100 a month each (and we will likely split my bonus & our tax return between our two roth's this year, which i believe should give us each a little under $4k contributing this year)

sorry if im a bit all over the place here.
Yes - those charts are "daunting". Some people easily hit their numbers early on because they have lower salaries, so the bar to get there was not that difficult. They then get a big career/salary bump in their 40's and or 50's and need to play catch up if they want to go with their later career salaries. Keep in mind, those charts are only to be used as a starting point and include the caveats of retiring at 67 with Social Security. No pension. No other income stream. It's just a rough guideline and that doesn't fit everyone's situation. Keep in mind, the power of compounding will have your current savings working for you and growing in the years going forward. Adding to it each and every month and year will only help that process. I was just showing you what - without any compounding - it would take to match what that "chart" from Fidelity lists of a multiple of your current salary to catch up to what the suggestion for you at age 40 would be.

Others talk about saving 25x your expenses (more if you retire early). Hard to guess what your expenses are going to be nearing retirement. Ours - at age 57/61 - happens to be around $66,500 right now (includes the mortgage payment). 25X our current expenses is $1.6M and would be needed if we didn't also have a pension, social security or other incomes streams to use towards covering those expenses. The logical way is to factor in what is needed to cover expenses after all incomes streams have been accounted for, and the remainder is needed to fill the gap. Hence, one would want to make sure at full retirement to have enough saved to cover 25X that gap amount at the very least.

It sounds like one of you is going to have a pension, so doing some study on what that could be would be worthwhile. That would be one of your income streams. As will Social Security for both of you since you are a dual income household. The third leg of your retirement income stream stool would come from your risk portfolio (stocks, bonds, CD's, cash). And the risk portfolio may not need to be has high since you would also have a pension and social security compared to another household that has no pension.

Your homework is to find out everything about that pension so you can make plans for the other two legs of the stool.

Image

The Fidelity chart with those "daunting" numbers means you may not have to have so many multiples of your household salary saved because the pension and social security combined will cover a lot of your expenses in retirement.
"Save like a pessimist, invest like an optimist." - Morgan Housel
Topic Author
rage_phish
Posts: 194
Joined: Thu Jan 31, 2019 4:27 pm

Re: New to the board, Looking for review/ advice/ guidance

Post by rage_phish »

Watty wrote: Tue Feb 05, 2019 4:00 pm
rage_phish wrote: Mon Feb 04, 2019 5:38 pm We feel we do well saving (but with the high COLA of the SF bay area & 1 kid in daycare (and another on the way)
rage_phish wrote: Mon Feb 04, 2019 5:38 pm Him: $83,000 + 10% bonus
Her: Currently $86,000
rage_phish wrote: Mon Feb 04, 2019 5:38 pm 2. Major changes we should be making? Issues we should be addressing? My wife and I both feel like we’re behind where we should be in regards
You are actually muddling through pretty good for being in such an expensive area but but I would think a $650K house in the Bay Area is probably pretty basic or you could have a very long commute. From what people have posted about the Bay Area I would also think that the quality of the schools could be an issue.

It was decades ago when I lived in there but the Bay Area has always been expensive. I ended up moving to a much less expensive area when I was ready to buy my first house and it worked out very well for me. One thing I saw even then was that some of my older coworkers had grown kids that were well in their 20's that were still living at home and that was not always a good situation. The problem was that the kids did not have high paying jobs and they could not afford to move out to an apartment even with roommates.

You might consider what the area will be like for your kids when they grow up and if they will be able to afford to live near you. With all the other expenses you have you may also not be able to pay a lot of their college expenses so they could also have large student loans.

I have moved around since then and I am in the Atlanta suburbs now which still has reasonable housing prices and I have a 30 year old son who is doing well and was able to afford to buy a house about ten minutes from us so we get to my son, his wife, and out two grandkids frequently. We also have some friends who have a son that is severely dyslexic and barely graduated from high school. At one point he was working at a chain muffler shop which is a good honest job but I am sure that it did not pay a lot. Even on that salary though he was able to buy a small older house in a marginal but not terrible area.

If you don't have strong family ties to the Bay Area I would take a hard look at eventually moving from the Bay Area to a less expensive area.

In probably 80% of the country you can get a really nice 3bd/3bath house in a good area for less than $300k, and often a lot less. Here is an example of what you could get in a good school district in the suburbs of Atlanta for less than $300K, but housing in a downtown or prime location would cost a lot more because of the bad commute in Atlanta.

https://www.realtor.com/realestateandho ... 61?view=qv


yeah we know we could get a lot more for less in other places (watching house hunters can be crushing at times lol)
but there are many factors that keep us here

1. all of our immediate (and most of our extended) family live within 20 minutes of us. our kids growing up surrounded by family is important to us
2. my wife is licensed to work in CA, leaving this state is not an option, nor wanted
3. we grew up here and love it here. there is no where else like the bay area, and we love it
3. commutes arent bad. mines about 15 minutes (used to be 2 hours round trip when i work in SF)
Topic Author
rage_phish
Posts: 194
Joined: Thu Jan 31, 2019 4:27 pm

Re: New to the board, Looking for review/ advice/ guidance

Post by rage_phish »

CyclingDuo wrote: Tue Feb 05, 2019 5:36 pm
rage_phish wrote: Tue Feb 05, 2019 2:51 pm in regard to the figures that state how much you should have by XX age, those are what have us always feeling like we are so far behind.

The idea of saving 40% of our income to equal that $70k annually would be awesome, but not at all doable for us..
our expenses are around $9-10k/ month

biggest expenses are:

Mortgage: $2,200 a month (plus about $7,500 in property taxes)
Day care: currently $1,025 a month, and that will more than double to more than our mortgage when our second starts day care in September
Groceries: $850/ month average (probably a lot, but we try to eat fresh and healthy and rarely ever eat out/ have food waste)
Cell phone: $194/ month (what drives me crazy about this is that i actually work for a competitor of our current cell phone company and could be getting a employee discount. but need to wait until next year to cancel when our contract expires)

other savings included:

529: $200/ month
kids savings account (high yield st synchrony): $200 biweekly (trying to build up a buffer for when day care increases)
Short term savings (high yield st synchrony): $700/ month ($175 a week) - generally used for property taxes and large surprise purchase that arise

last year (not including our retirement accounts) we saved just under $30,000, which we were really proud of and got us to our funded emergency fund. and as nice as it would to simply funnel that $30k going forward into our retirement accounts, we're about to have an additional $17,400 in day care costs annually (and thats not including all the other costs of a second kid)

we did just start funding out roth's again at $100 a month each (and we will likely split my bonus & our tax return between our two roth's this year, which i believe should give us each a little under $4k contributing this year)

sorry if im a bit all over the place here.
Yes - those charts are "daunting". Some people easily hit their numbers early on because they have lower salaries, so the bar to get there was not that difficult. They then get a big career/salary bump in their 40's and or 50's and need to play catch up if they want to go with their later career salaries. Keep in mind, those charts are only to be used as a starting point and include the caveats of retiring at 67 with Social Security. No pension. No other income stream. It's just a rough guideline and that doesn't fit everyone's situation. Keep in mind, the power of compounding will have your current savings working for you and growing in the years going forward. Adding to it each and every month and year will only help that process. I was just showing you what - without any compounding - it would take to match what that "chart" from Fidelity lists of a multiple of your current salary to catch up to what the suggestion for you at age 40 would be.

Others talk about saving 25x your expenses (more if you retire early). Hard to guess what your expenses are going to be nearing retirement. Ours - at age 57/61 - happens to be around $66,500 right now (includes the mortgage payment). 25X our current expenses is $1.6M and would be needed if we didn't also have a pension, social security or other incomes streams to use towards covering those expenses. The logical way is to factor in what is needed to cover expenses after all incomes streams have been accounted for, and the remainder is needed to fill the gap. Hence, one would want to make sure at full retirement to have enough saved to cover 25X that gap amount at the very least.

It sounds like one of you is going to have a pension, so doing some study on what that could be would be worthwhile. That would be one of your income streams. As will Social Security for both of you since you are a dual income household. The third leg of your retirement income stream stool would come from your risk portfolio (stocks, bonds, CD's, cash). And the risk portfolio may not need to be has high since you would also have a pension and social security compared to another household that has no pension.

Your homework is to find out everything about that pension so you can make plans for the other two legs of the stool.

Image

The Fidelity chart with those "daunting" numbers means you may not have to have so many multiples of your household salary saved because the pension and social security combined will cover a lot of your expenses in retirement.

i agree I should familiarize myself more with the pension (my wife knows more about it of course).

i think part of it is that we dont expect my wife to work there until retirement. we get reduced cost day care through her current employer, so we will be there until the youngest is out of day care (at least that the general idea right now), after that my wife would like to start her own private practice

sitting on a 3 leg stool sounds much more fun that a 2 leg stool!
Topic Author
rage_phish
Posts: 194
Joined: Thu Jan 31, 2019 4:27 pm

Re: New to the board, Looking for review/ advice/ guidance

Post by rage_phish »

In regards to the pension, it looks like it would be paying out about $1,600 a month is my wife stays at the employer for 5 more years (as we often talk about)

Obviously more if she stool around longer. But that would require some changes in the pay ceiling she currently falls under
Topic Author
rage_phish
Posts: 194
Joined: Thu Jan 31, 2019 4:27 pm

Re: :UPDATED: New to the board, Looking for review/ advice/ guidance

Post by rage_phish »

Bumping this for additional guidance now that 2 years have passed
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