Our numbers: 39F/40M,1YO baby.
Current gross approx $360k per year. Probably no huge raises: expect 2.5% - 3% inflation adjusted raises in the future.
Saving $96k this year in tax advantaged and taxable accounts earmarked for retirement (includes company matches). Will increase this by 3% every year. Currently have $1.22M in these accounts.
Owe approx $270k on a house worth $490k.
No debt except $20k car loan (just bought new 3 row SUV) and will add another $30k car loan toward the end of this year (planning on buying another new car for my commute). First time we've bought new cars and we plan on keeping for a long long time.
Have about $50k in various checking accounts for monthly spending, upcoming expenses, vacations etc, and EF.
529 contributions on track, with assumed 3% annual growth, to have about $250k by baby's 18th birthday.
Expect eventual inheritance in the $1M range in maybe 25 years. Obviously not planning on that, but just putting it here for full disclosure if anyone thinks it's relevant.
My current IPS (started in 2013, added to upon birth of child) says:
These are the main objectives for our investment program. I have developed them after a review of our financial resources, financial goals, asset allocation, risk tolerance and time horizon.
Objective 1: To retire between the ages of 52 and 55
Objective 2: To have an annual income from our investments of $100,000 to $120,000 after taxes and in today’s dollars
Objective 3: To increase total retirement contributions by at least 3% each year, starting at $80,000 in 2013, increasing to $144,500 by 2033
Objective 4: To contribute a 529 plan a minimum of $600 per month starting June 2018 and increase monthly contributions by 3% annually. To be invested in total stock market. Will reassess upon possible early retirement.
Following this, we are currently 30% in bonds, but in 2020 when I turn 40, my IPS says I should move to 35%.Asset Allocation:
Begin with overall 70% stock + 30% bond. Assets should be diversified across major asset classes including domestic equity, international equity (30% of equities), and total bond index fund. Plan is to “glide path” into a more conservative asset allocation of approximately (age – 5) percent in bonds as time progresses. As planned early retirement becomes a real possibility, begin transitioning some money (~10 percent) into cash and cash equivalents.
This is a long winded way to ask if this seems too conservative. I was torn between basing my AA on age or on my "desired" retirement age, meaning that when I'm 50, should I have the same conservative AA that a retiree at 65 would have?
I'm considering changing it to maybe age - 10 in bonds rather than age - 5, and change every 5 years. That means I'd stay at 30% bonds for another 5 years, then go to 35% at 45 years old, and be at 40% bonds at 50 years old when we'd be seriously thinking about retiring soon.
What are your thoughts?