Turning 50

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stevegpt
Posts: 12
Joined: Sun Mar 13, 2011 6:47 pm

Turning 50

Post by stevegpt » Wed Dec 21, 2011 8:53 am

Good Morning,

I'm turning 50 this upcoming calendar year and would like some advice.

My current situation is:

Salary $120,000+
401K ~$250,000
Non Qual Exec Plan ~$65,000
Roth IRA (converted) ~$20,000 putting $6,000 from here out
Mortgage will be paid off in 3 yrs
No other debt

I will be increasing my 401K contribution to $22,500 this year. I will also contribute $20,000 to my Non Qual plan. This will continue until my mortgage is paid off then the Non Qual contributions will increase.

Below are my current 401K contributions (and investment) contributions. Below that are six Vanguard funds I have available to me. I would like to retire between 55 and 60 (as soon as I'm comfortable). I work for a large company and have been in the same profession all my life with job security as good as it can be these days. I'm currently taking the advice of the plan sponsor.

Any advise would be greatly appreciated. Thanks!

Current Investments (approx 3.5% loss YTD):

Lazard Emerging Markets Equity 5.88%
Invesco International Growth 5.99%
Allianz NFJ Intl Value 6.01%
Royce Value Plus Service 3.15%
Perkins Small Cap Value 3.16%
Prudential Jennison Mid Cap Growth 3.14%
Columbia Mid Cap Value 3.16%
American Funds Growth Fund 12.15%
Davis NY Venture 6.26%
MFS Value 12.58%
Loomis Sayles Strategic Income 9.58%
Templeton Global Bond 7.75%
PIMCO Total Return 14.48%
Vanguard Total Bond Index 6.71%

Available from Vanguard:

Vanguard Short-Term Treasury
Vanguard Total Intl Stock Ind
Vanguard Small Cap Index
Vanguard Mid Cap Index
Vanguard Institutional Index
Vanguard Total Bond Index

livesoft
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Re: Turning 50

Post by livesoft » Wed Dec 21, 2011 8:58 am

No taxable account, but you have a non-qualified plan?
I personally would invest some money tax-efficiently in a regular taxable investment account.

Whether you can retire at 55 to 60 will depend on your expenses (including taxes) and your income from other sources. Generally folks find that they will need 25 to 30 times their expenses saved up before they retire. See http://www.firecalc.com and perhaps http://www.i-orp.com .
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hlfo718
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Location: NYC

Re: Turning 50

Post by hlfo718 » Wed Dec 21, 2011 9:14 am

Are you one of those lucky folks that will be collecting a pension hence your desire & ability to retire in 5-10 years?

It seems that the amount you have so far plus 30k+ you save annually for the next five years won't be sufficient to cover your expenses since you won't qualified for medicare for a few more years and you probably will live for another 30 or so years. But if you have a pension with full healthcare coverage, then a whole new ball game.

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Boglenaut
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Re: Turning 50

Post by Boglenaut » Wed Dec 21, 2011 9:14 am

You have some good VG funds available. I suspect when you look at the details they will become your main choices.
I'm currently taking the advice of the plan sponsor.
Are they getting commissions or other reimbursements to get you into the non-VG funds?

I also suggest picking up the savings rate. You make $120K/year but by age 50 have not saved very much. Will you be getting a pension or other source of income?

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Boglenaut
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Re: Turning 50

Post by Boglenaut » Wed Dec 21, 2011 9:21 am

Salary $120,000+
I will be increasing my 401K contribution to $22,500 this year.
Your company must have a high particpation rate from lower paid employees, or contribute a lot itself, otherwise you'd be a Highly Compensated Employee subject to restrictions on your contribution amount. Lucky you!

stevegpt
Posts: 12
Joined: Sun Mar 13, 2011 6:47 pm

Re: Turning 50

Post by stevegpt » Wed Dec 21, 2011 9:27 am

Thanks, I do have about $25k in savings. No taxable account. Also, to explain the lack of savings. My dad, brother and myself started a company in '94. At that point salaries were LOW. In 2002 we sold the business (minimal proceeds) and that company has since be purchased by the large company. I have no pension but I'm paying the house off rapidly ($113,000 remaining at 2.99% ING Easy Mortgage). Once the house is paid off in 3 yrs, I have a lot more to work with. Thanks all

stevegpt
Posts: 12
Joined: Sun Mar 13, 2011 6:47 pm

Re: Turning 50

Post by stevegpt » Wed Dec 21, 2011 9:30 am

8,000+ employees. Select managers make a defined amount are permitted to participate in the Non Qual Exec Plan.

Might I add, my daughter graduated from JMU and I've paid off.

Boglenaut wrote:
Salary $120,000+
I will be increasing my 401K contribution to $22,500 this year.
Your company must have a high particpation rate from lower paid employees, or contribute a lot itself, otherwise you'd be a Highly Compensated Employee subject to restrictions on your contribution amount. Lucky you!

Grt2bOutdoors
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Location: New York

Re: Turning 50

Post by Grt2bOutdoors » Wed Dec 21, 2011 11:00 am

Have you done a cost comparison of expense ratios between your actively managed investments in the 401k plan vs. the remaining Vanguard Index investment choices available? You will find you have more of your return eaten away in fees, I have not seen the fund data versus their respective benchmark, but would be surprised if each of your investment selections have beat the standard over the 1,3,5 and 10 year periods net of expense.

I hope your large company is fiscally conservative, non qualified deferred plans are fair game in bankruptcy court - unless I'm mistaken and the rules have changed.

Does the company offer a match to the 401k plan? I would suspect they do, especially if it's a large/mid sized company. Assuming you bank all of the mortgage payment in a conservative investment manner, continue with 401k plan and either use the non qualified plan or some other vehicle you might wind up with over a million in your combined retirement plan or greater, all dependent on returns of course. Is that enough to carry you over to Social Security and Medicare - it may not be, health insurance is pricey today, who knows in 10 years?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Watty
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Re: Turning 50

Post by Watty » Wed Dec 21, 2011 12:41 pm

I would like to retire between 55 and 60 (as soon as I'm comfortable).

If you will be retiring with less than the 35 years of work that are counted for Social security and possibly have had highly variable income over your career, you need to be extra careful with looking at any estimates of what your social security benefits will be. Often they are based on a default assumption that you will be working at your current salary until you start receiving social security. They have put a pretty good calculator on the social security web site that may let you control a lot of these assumptions and get a more realistic idea of how much you should get.

Completely retiring at 55 is pretty challenging because it reduces the years to save, the years your investments will grow, increases the years you will need to support yourself, increased the odds that you will be retired during a vicious bear market (being retired 40 years instead of 30 increases the chance of this by 33%), and may require more year of you paying for your own health insurance. This will require a pretty large nest egg that will be hard to save for that quickly. You might want to consider changing your plans and target going to part time work at that age. If you could earn enough working part time to at least cover your expenses for a few more years after 55 or 60 this will greatly help your odds of success.

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Watty
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Re: Turning 50

Post by Watty » Wed Dec 21, 2011 12:45 pm

Roth IRA (converted) ~$20,000 putting $6,000 from here out

I would suspect that you might be in a lower tax bracket when you retire, if you are elegible then a deductable IRA might be a better choice.

chaz
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Re: Turning 50

Post by chaz » Wed Dec 21, 2011 1:01 pm

Good choices:

Vanguard Institutional Index
Vanguard Total Bond Index
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

stevegpt
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Joined: Sun Mar 13, 2011 6:47 pm

Re: Turning 50

Post by stevegpt » Sun Mar 26, 2017 2:52 pm

How time flies -- I posted this six years ago and don't think I've posted anything since (but have read to exhaustion). I turn 55 next month. A lot can and does happen in this amount of time! My dad passed three years ago at 73 from acute lukemia. So I'm more determined than ever to make this happen.

I switched employers in 2014 and am currently working just part time. I also moved from AL back to my home state of ME.

Full time salary $150k+ but only working as provisional so this yr will be ~$40k
Roll Over IRA Vanguard -- $485,000
401K w/current employer ~ $80,000
Non Qual Exec Plan w/old employer ~$0 (cashed out with lump sum upon separation (didn't realize I had elected this) -- took huge hit on taxes in 2014)
Roth IRA Vanguard -- $43,000
Taxable Vanguard -- $310,000
Mortgage paid off
No debt

I called SSA and got values assuming I don't work beyond 2016 (though I currently am part time). At 62 I would received $20,892. Waiting till 67 I would receive $28,548.

Based on my numbers I can get close to $50,000/yr with 100% reliability. With my recently reduced hours I'm currently on ACA so we'll have to see how that goes based on last Fridays no-vote repeal. I'm going to pull the trigger next year at 56. I'll live modestly for a few years and do Roth conversions to account for ACA income while living off my taxable. Thinking $36k tax free to start.

Based on my circumstance,I think I'm about there,

Steve

chaz
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Joined: Tue Feb 27, 2007 2:44 pm

Re: Turning 50

Post by chaz » Mon Mar 27, 2017 1:43 pm

steve, looks like you are ready for retirement.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

wolf359
Posts: 1391
Joined: Sun Mar 15, 2015 8:47 am

Re: Turning 50

Post by wolf359 » Mon Mar 27, 2017 2:21 pm

stevegpt wrote:How time flies -- I posted this six years ago and don't think I've posted anything since (but have read to exhaustion). I turn 55 next month. A lot can and does happen in this amount of time! My dad passed three years ago at 73 from acute lukemia. So I'm more determined than ever to make this happen.

I switched employers in 2014 and am currently working just part time. I also moved from AL back to my home state of ME.

Full time salary $150k+ but only working as provisional so this yr will be ~$40k
Roll Over IRA Vanguard -- $485,000
401K w/current employer ~ $80,000
Non Qual Exec Plan w/old employer ~$0 (cashed out with lump sum upon separation (didn't realize I had elected this) -- took huge hit on taxes in 2014)
Roth IRA Vanguard -- $43,000
Taxable Vanguard -- $310,000
Mortgage paid off
No debt

I called SSA and got values assuming I don't work beyond 2016 (though I currently am part time). At 62 I would received $20,892. Waiting till 67 I would receive $28,548.

Based on my numbers I can get close to $50,000/yr with 100% reliability. With my recently reduced hours I'm currently on ACA so we'll have to see how that goes based on last Fridays no-vote repeal. I'm going to pull the trigger next year at 56. I'll live modestly for a few years and do Roth conversions to account for ACA income while living off my taxable. Thinking $36k tax free to start.

Based on my circumstance,I think I'm about there,

Steve
I'm definitely relating to your original post because I'm close to that age.

By my math, you have $918K. With the 4% rule, you can safely withdraw $36,720/year for about 30 years. Assuming you start SS at 62 (6 years after retirement), you'll have $36K for 6 years, then $57,612 at year 7. If your target income is $50K, you'll achieve that by downshifting to a 3% SWR when SS starts.

The math works, but you're relying on Social Security to provide a significant percentage of your income. You're then retiring 6 or more years prior to applying for Social Security (which is 7-12 years from now)

What is your backup plan if there are significant changes to Social Security in the next 7-12 years? If there are NO changes to Social Security in the next 12 years, Social Security's trust fund is expected to be depleted, after which it will still be around, just with a 25% or so reduction in payout. Can your plan survive if your Social Security payment (at 62) is $15,700 instead? (That's what SS predicts on current statements in the absence of funding changes.)

Obviously, you also have the possibility of health care reform. How close to your desired income is this plan? Does it allow for variation in expenses should health care costs change in the next 10 years ( your window of risk is until you qualify for Medicare at 65.)

The numbers say you can do it, but how comfortable are you with the narrow margin for error?

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