Early Retirement & College Planning – Stress Test Our Plan

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Topic Author
berg
Posts: 468
Joined: Mon Mar 18, 2013 8:43 pm

Early Retirement & College Planning – Stress Test Our Plan

Post by berg »

I’m looking to do a check-in on where we stand and see if there is something we might be missing in our calculations.

We have some major goals and we appear on track, but want to make sure we don’t have any blind spots.

I’m 42, my wife is 39. We have two kids ages 8 and 10. I’m targeting an early retirement (or at the least the flexibility, I'm interested in volunteering for example). My wife is a teacher and will retire with a pension at age 58. One of the benefits of my early retirement will be to enjoy our summers off together for travel, while she continues to work until she can max her pension. Another big goal we have is to fund our children’s college education.

So where are we at?

In terms of college, we are on track to fully fund in state school and about 75% of a full price private school, e.g. Syracuse. We contribute about $10k per year and each of their accounts have $115k and $125k in them today. We figure we can cashflow as needed if we choose (and hopefully they aren’t paying full price at the most expensive school).

In terms of retirement, our target number is around $5.5M + the pension. We have about $2.95M in investments. We save around $90k per year. At 5% real return, we’d hit $5.5M in 9 years (right as my youngest graduates high school) or about 10 years at 4% (or 16 years if we never saved again, which gives us some comfort if we ever had to downshift savings).

Our goal is about $275k in pre tax income. My wife’s pension is not really inflation adjusted, so will start out around $70k per year. And then eventually I’ll have SS. And thanks to the recent law change, my wife would now get survivor benefits as well. The $5.5M assumes about a 3.8% withdrawal, doesn’t factor SS or our mortgage falling off around age 68 (it’s 2.5% rate). Our current asset allocation is 75/25.

Healthcare will be covered through my wife while she works and then in her retirement.

Overall we feel fortunate to be on track to hit these major goals. But (and perhaps this is the boring middle…or the back half of it), we feel close enough that we can see the light, but also a lot can happen in 10 years.

Any big things to look out for or that feels missing?
ScubaHogg
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Joined: Sun Nov 06, 2011 2:02 pm

Re: Early Retirement & College Planning – Stress Test Our Plan

Post by ScubaHogg »

My recommendation is to plug it all into tpawplanner.com and see how you like the various spending paths

There’s a thread on here that explains the planner in depth
“You can have a stable principal value or a stable income stream but not both" | - In Pursuit of the Perfect Portfolio
bonesly
Posts: 2495
Joined: Mon Dec 18, 2017 9:28 pm
Location: WA

Re: Early Retirement & College Planning – Stress Test Our Plan

Post by bonesly »

berg wrote: Mon Feb 03, 2025 10:44 am 1) In terms of college, we are on track to fully fund in state school and about 75% of a full price private school, e.g. Syracuse. We contribute about $10k per year and each of their accounts have $115k and $125k in them today. We figure we can cashflow as needed if we choose (and hopefully they aren’t paying full price at the most expensive school).

2) In terms of retirement, our target number is around $5.5M + the pension. We have about $2.95M in investments. We save around $90k per year. At 5% real return, we’d hit $5.5M in 9 years (right as my youngest graduates high school) or about 10 years at 4% (or 16 years if we never saved again, which gives us some comfort if we ever had to downshift savings).

3) Our goal is about $275k in pre tax income. My wife’s pension is not really inflation adjusted, so will start out around $70k per year. And then eventually I’ll have SS. And thanks to the recent law change, my wife would now get survivor benefits as well. The $5.5M assumes about a 3.8% withdrawal, doesn’t factor SS or our mortgage falling off around age 68 (it’s 2.5% rate). Our current asset allocation is 75/25.

4) Healthcare will be covered through my wife while she works and then in her retirement.

Any big things to look out for or that feels missing?
1) I'll take your word that college funding is on track. FV(4% real return, 8 years until eldest enters college, -10K/yr contribution, -$125K curr bal) = $263K, so you only need about $260-280K to fund 4 years in-state in today's dollars. If that didn't match your estimates, you might say what in-state tuition costs (and perhaps consider the tuition-specific inflation rate which is probably higher than the general CPI).

2 & 3) if you reach $5.5M (+ the pension), when she reaches age 58, and she lives to 95, that's a withdrawl phase of 35 years. The 4% "rule" for 30y is reduced to 3.7% (27x expenses rather than 25x) for a 35y period (37y rounded down to the nearest multiple of 5). 3.7% of $5,500K is $203.5K. Your goal of $275K (including expenses + savings for home repair, cars, vacation + income taxes) is about ($203.5K + pension = $70K). Given that you'll be able to collect SocSec at 62 (one year after she retires), you're probably still Ok despite her pension having no COLA. You might even still be able to defer collecting SocSec until age 70 to maximize that benefit. She likely qualifies for a spousal benefit based on your earnings, even if she never paid into SocSec, so look at that too before you apply (probably you should apply for your benefit and her spousal benefit at the same time). I don't see any glaring issues, but you might want to get your latest SocSec benefit estimate (and her spousal benefit est.) at https://ssa.gov and look at the optimal claiming age over at https://opensocialsecurity.com.

4) Do you get to keep her HC coverage plan if she passes first? Same question about any portion of her pension?
Don't do what Bogleheads tell you. Listen to what we say, consider other sources, and make your own decisions, since you have to live with the risks & rewards (not us or anyone else).
Topic Author
berg
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Joined: Mon Mar 18, 2013 8:43 pm

Re: Early Retirement & College Planning – Stress Test Our Plan

Post by berg »

bonesly wrote: Mon Feb 03, 2025 4:23 pm
berg wrote: Mon Feb 03, 2025 10:44 am 1) In terms of college, we are on track to fully fund in state school and about 75% of a full price private school, e.g. Syracuse. We contribute about $10k per year and each of their accounts have $115k and $125k in them today. We figure we can cashflow as needed if we choose (and hopefully they aren’t paying full price at the most expensive school).

2) In terms of retirement, our target number is around $5.5M + the pension. We have about $2.95M in investments. We save around $90k per year. At 5% real return, we’d hit $5.5M in 9 years (right as my youngest graduates high school) or about 10 years at 4% (or 16 years if we never saved again, which gives us some comfort if we ever had to downshift savings).

3) Our goal is about $275k in pre tax income. My wife’s pension is not really inflation adjusted, so will start out around $70k per year. And then eventually I’ll have SS. And thanks to the recent law change, my wife would now get survivor benefits as well. The $5.5M assumes about a 3.8% withdrawal, doesn’t factor SS or our mortgage falling off around age 68 (it’s 2.5% rate). Our current asset allocation is 75/25.

4) Healthcare will be covered through my wife while she works and then in her retirement.

Any big things to look out for or that feels missing?
1) I'll take your word that college funding is on track. FV(4% real return, 8 years until eldest enters college, -10K/yr contribution, -$125K curr bal) = $263K, so you only need about $260-280K to fund 4 years in-state in today's dollars. If that didn't match your estimates, you might say what in-state tuition costs (and perhaps consider the tuition-specific inflation rate which is probably higher than the general CPI).

2 & 3) if you reach $5.5M (+ the pension), when she reaches age 58, and she lives to 95, that's a withdrawl phase of 35 years. The 4% "rule" for 30y is reduced to 3.7% (27x expenses rather than 25x) for a 35y period (37y rounded down to the nearest multiple of 5). 3.7% of $5,500K is $203.5K. Your goal of $275K (including expenses + savings for home repair, cars, vacation + income taxes) is about ($203.5K + pension = $70K). Given that you'll be able to collect SocSec at 62 (one year after she retires), you're probably still Ok despite her pension having no COLA. You might even still be able to defer collecting SocSec until age 70 to maximize that benefit. She likely qualifies for a spousal benefit based on your earnings, even if she never paid into SocSec, so look at that too before you apply (probably you should apply for your benefit and her spousal benefit at the same time). I don't see any glaring issues, but you might want to get your latest SocSec benefit estimate (and her spousal benefit est.) at https://ssa.gov and look at the optimal claiming age over at https://opensocialsecurity.com.

4) Do you get to keep her HC coverage plan if she passes first? Same question about any portion of her pension?
Great questions. Thanks!

re: healthcare, great question. I believe I am eligible if she passes first, but I should further verify some of that.

Great points on the withdrawal rate and length. I estimated 3.8% assuming that there is some flexibility with SS (which I haven't really factored for the most part) and the mortgage falling off at age 68 for me/66 for her. As we get closer to the number, I also would assume we'd reevaluate based on updated spending with more accuracy, etc.

At 9-11 years out, I didn't want to be overly precise when things could still change, but if there are things that make sense to zero in on, would love to hear them!
bonesly
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Location: WA

Re: Early Retirement & College Planning – Stress Test Our Plan

Post by bonesly »

berg wrote: Tue Feb 04, 2025 12:17 pm At 9-11 years out, I didn't want to be overly precise when things could still change, but if there are things that make sense to zero in on, would love to hear them!
As my managers at work used to tell me "a plan is just something to deviate from," so the further out you are from actually executing the plan, the less I think you need to work on its accuracy. Your current plan seems good enough. College funding seems like it might be coming up before retirement spending, so I'd focus on the kids' education financing first and then review your own situation about 5y out from retirement.
Don't do what Bogleheads tell you. Listen to what we say, consider other sources, and make your own decisions, since you have to live with the risks & rewards (not us or anyone else).
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dogagility
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Re: Early Retirement & College Planning – Stress Test Our Plan

Post by dogagility »

Agree with Scubahogg about using the tpawplanner tool to model this. It incorporates all of the variables (pension/SS/future portfolio contributions) and provides a Monte carlo-based future spending projection in real dollars.
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