Letting retirement funds grow, without further contribution

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nwa-non
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Letting retirement funds grow, without further contribution

Post by nwa-non » Fri Nov 15, 2019 12:53 pm

Let's assume the following.
- I'm 40.
- I have $500k in retirement savings.

If I stop funding my retirement right now and don't put in a single cent for the next 25 years, I should (theoretically) end up with over $1.5M in retirement funds with a conservative 4.5% CAGR.

Let's also assume I've calculated <edit:income, wrong> expense in retirement is about $48k/year. The $1.5M should be able to fund that income.

So ....someone convince me why I need to keep funding retirement rather than just let it grow?
Last edited by nwa-non on Fri Nov 15, 2019 2:02 pm, edited 1 time in total.

bovineplane
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Re: Letting retirement funds grow, without further contribution

Post by bovineplane » Fri Nov 15, 2019 1:03 pm

Because 25 years is alot of unknowns.

rkhusky
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Re: Letting retirement funds grow, without further contribution

Post by rkhusky » Fri Nov 15, 2019 1:04 pm

You don’t know the future.
You will pay more tax.
Do you have a better use for the money?

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mhc
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Re: Letting retirement funds grow, without further contribution

Post by mhc » Fri Nov 15, 2019 1:05 pm

What if you can't work until you are 65? You should look up the stats on how many people cannot work at age 50, 55, 60, 65, ...

There are a lot of people who cannot work as long as they desire due to medical issues. Also, depending on your industry, age descrimination can come into play with staying employed.

JediMisty
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Re: Letting retirement funds grow, without further contribution

Post by JediMisty » Fri Nov 15, 2019 1:13 pm

mhc wrote:
Fri Nov 15, 2019 1:05 pm
What if you can't work until you are 65? You should look up the stats on how many people cannot work at age 50, 55, 60, 65, ...

There are a lot of people who cannot work as long as they desire due to medical issues. Also, depending on your industry, age descrimination can come into play with staying employed.
+1. This. Also, in 25 years, inflation will have eroded your buying power of that 1.5 M. I'm 61 now, the costs difference in well, everything, is astounding since I was 40.

delamer
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Re: Letting retirement funds grow, without further contribution

Post by delamer » Fri Nov 15, 2019 1:17 pm

Do you mean that you’ll need to withdraw $48,000 to cover expenses in 25 years?

Have you calculated everything in current or future dollars? You can’t determine expenses in today’s dollars and compare that to income in future inflated dollars.

MathWizard
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Re: Letting retirement funds grow, without further contribution

Post by MathWizard » Fri Nov 15, 2019 1:21 pm

You should be congratulated on the half a million you have in retirement funds.

The best argument for continuing to contribute, ate least to a ROTH, is that this is tax advantaged investing.

You want to reach Financial Independence as soon as reasonably possible. Then you are the master of your own fate.

Also, if you do not contribute to retirement funds, you will see your lifestyle creep well beyond $48K.
Remember that if you have health insurance through your employer, you will likely be paying much more even after medicare kicks in.
I estimate $10.2K for the two of us after medicare kicks in at 65. (Medicare has a premium, and I am including a supplemental insurance
and prescription benefit.)

If you truly don't need more than $48K, You can put your money into a ROTH IRA or a ROTH 401k if you do not want to put it in tax deferred.

I assume that the 4.5% CAGR is real, not nominal, so the 1.5 Million would be in current dollars.

dbr
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Re: Letting retirement funds grow, without further contribution

Post by dbr » Fri Nov 15, 2019 1:23 pm

Is the 4.5% real? If not, then is the $48k going to be enough after your purchasing power is eroded by 25 years of inflation?

Aside from that, as others are alluding, the future is uncertain and retirement needs to be approached by successive approximation.

So the answer is that in theory this works but as Yogi said "In theory, theory and practice are the same thing, but in practice they aren't."

But I think the real question is what are Plans B, C, D and so on if you have to start retirement earlier than 65, if you become chronically ill or disabled, if your estimate of $48k in income needs to be rethought, etc.

Would it be ok now to stop contributing more and spend money for awhile. Maybe, probably, but you have to judge the risks for yourself.

One place to see what the possibilities have looked at historically is to go to FireCalc and start a 25 year model with no withdrawals and whatever asset allocations you want and see what could happen.

flyingaway
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Re: Letting retirement funds grow, without further contribution

Post by flyingaway » Fri Nov 15, 2019 1:25 pm

How much is your current spending without retirement account contributions? If it is more than $48,000 you want to spend in 25 years, how do you know you can cut back, not even counting inflation?

Silk McCue
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Re: Letting retirement funds grow, without further contribution

Post by Silk McCue » Fri Nov 15, 2019 1:42 pm

It's halftime. If you want to win get back on the field and play like you are going to lose game.

Cheers

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nwa-non
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Re: Letting retirement funds grow, without further contribution

Post by nwa-non » Fri Nov 15, 2019 1:45 pm

Thanks to everyone who has responded!

I should have perhaps rephrased my original post better. Let me try to clarify.

First, by "retirement funds", I meant only asset in 401(k). By this (wrong) constraint, it does not encompass t-IRA, Roth IRA, cash, property, taxable brokerage.

Second, when I said "without further contribution", I meant only to the 401(k). The plan would be to still fund Roth and taxable brokerage account.

Third, the 4.5% is real. I started with 6.6% nominal and had 2% inflation. The DJIA has returned "True CAGR" of 6.87% from 1871 to 2018. (http://www.moneychimp.com/features/market_cagr.htm)

And lastly, this is a thought exercise more than anything else.

Please chime in if this changes what you wrote before.
Last edited by nwa-non on Fri Nov 15, 2019 2:03 pm, edited 1 time in total.

runner540
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Re: Letting retirement funds grow, without further contribution

Post by runner540 » Fri Nov 15, 2019 1:47 pm

nwa-non wrote:
Fri Nov 15, 2019 1:45 pm
Thanks to everyone who has responded!

I should have perhaps rephrased my original post better. Let me try to clarify.

First, by "retirement funds", I meant only asset in 401(k). By this (wrong) constraint, it does not encompass t-IRA, Roth IRA, cash, property, taxable brokerage.

Second, when I said "without further contribution", I meant only to the 401(k). The plan would be to still fund Roth, and taxable brokerage account.

Third, the 4.5% is real. I started with 6.6% nominal and had 2% inflation. The DJIA has returned "True CAGR" of 6.87% from 1871 to 2018. (http://www.moneychimp.com/features/market_cagr.htm)

And lastly, this is a thought exercise more than anything else.

Please chime in if this changes what you wrote before.
Ok, thought exercise: What are you going to do with your 401k contribution amount (without the tax shield), that is worth more to you than greater spending in retirement, or an earlier retirement, or one with less risk?

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nwa-non
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Re: Letting retirement funds grow, without further contribution

Post by nwa-non » Fri Nov 15, 2019 1:48 pm

MathWizard wrote:
Fri Nov 15, 2019 1:21 pm
You should be congratulated on the half a million you have in retirement funds.

The best argument for continuing to contribute, ate least to a ROTH, is that this is tax advantaged investing.

You want to reach Financial Independence as soon as reasonably possible. Then you are the master of your own fate.

Also, if you do not contribute to retirement funds, you will see your lifestyle creep well beyond $48K.
Remember that if you have health insurance through your employer, you will likely be paying much more even after medicare kicks in.
I estimate $10.2K for the two of us after medicare kicks in at 65. (Medicare has a premium, and I am including a supplemental insurance
and prescription benefit.)

If you truly don't need more than $48K, You can put your money into a ROTH IRA or a ROTH 401k if you do not want to put it in tax deferred.

I assume that the 4.5% CAGR is real, not nominal, so the 1.5 Million would be in current dollars.
Thanks MathWizard, your comment has all - encouragement, empathy, tips, and good assumption that 4.5% CAGR is real.

fposte
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Re: Letting retirement funds grow, without further contribution

Post by fposte » Fri Nov 15, 2019 1:49 pm

What's your reason for funding the taxable brokerage account and not the 401k? Will those also be buy-and-hold assets untouched until retirement?

KlangFool
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Re: Letting retirement funds grow, without further contribution

Post by KlangFool » Fri Nov 15, 2019 1:51 pm

nwa-non wrote:
Fri Nov 15, 2019 1:45 pm
Thanks to everyone who has responded!

I should have perhaps rephrased my original post better. Let me try to clarify.

First, by "retirement funds", I meant only asset in 401(k). By this (wrong) constraint, it does not encompass t-IRA, Roth IRA, cash, property, taxable brokerage.

Second, when I said "without further contribution", I meant only to the 401(k). The plan would be to still fund Roth, and taxable brokerage account.

Third, the 4.5% is real. I started with 6.6% nominal and had 2% inflation. The DJIA has returned "True CAGR" of 6.87% from 1871 to 2018. (http://www.moneychimp.com/features/market_cagr.htm)

And lastly, this is a thought exercise more than anything else.

Please chime in if this changes what you wrote before.
nwa-non,

<<Second, when I said "without further contribution", I meant only to the 401(k). The plan would be to still fund Roth, and taxable brokerage account.>>

1) 401K is not a retirement account. It is a tax-advantaged account. You can withdraw the money from 401K penalty-free before 59 1/2 years old.

2) Why would you want to do that? You would be paying a lot more taxes unnecessary. Unless you enjoy paying taxes instead of spending your own money, why would you do that?

KlangFool

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nwa-non
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Re: Letting retirement funds grow, without further contribution

Post by nwa-non » Fri Nov 15, 2019 1:53 pm

mhc wrote:
Fri Nov 15, 2019 1:05 pm
What if you can't work until you are 65? You should look up the stats on how many people cannot work at age 50, 55, 60, 65, ...

There are a lot of people who cannot work as long as they desire due to medical issues. Also, depending on your industry, age descrimination can come into play with staying employed.
Thanks for your insight! This is in part (that I didn't say anything about originally) scaling back on working now, while I am still able to work.

H-Town
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Re: Letting retirement funds grow, without further contribution

Post by H-Town » Fri Nov 15, 2019 1:56 pm

nwa-non wrote:
Fri Nov 15, 2019 12:53 pm
Let's assume the following.
- I'm 40.
- I have $500k in retirement savings.

If I stop funding my retirement right now and don't put in a single cent for the next 25 years, I should (theoretically) end up with over $1.5M in retirement funds with a conservative 4.5% CAGR.

Let's also assume I've calculated income in retirement is about $48k/year. The $1.5M should be able to fund that income.

So ....someone convince me why I need to keep funding retirement rather than just let it grow?
I don't see you mention anything about healthcare expenses, taxes, and inflation... 48k/year doesn't seem to account for those 3 big expenses.

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nwa-non
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Re: Letting retirement funds grow, without further contribution

Post by nwa-non » Fri Nov 15, 2019 1:58 pm

KlangFool wrote:
Fri Nov 15, 2019 1:51 pm
<<Second, when I said "without further contribution", I meant only to the 401(k). The plan would be to still fund Roth, and taxable brokerage account.>>

1) 401K is not a retirement account. It is a tax-advantaged account. You can withdraw the money from 401K penalty-free before 59 1/2 years old.

2) Why would you want to do that? You would be paying a lot more taxes unnecessary. Unless you enjoy paying taxes instead of spending your own money, why would you do that?

KlangFool
1. 401(k) is tax advantaged retirement account. And yes, I know of the ways to get that money penalty free if I need it. Thanks!

2. Tax bracket will certainly be going down, if and when this scenario comes to fruition. I'm ok with paying a little more in tax now and let the growth (Roth) be tax free.

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nwa-non
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Re: Letting retirement funds grow, without further contribution

Post by nwa-non » Fri Nov 15, 2019 2:01 pm

fposte wrote:
Fri Nov 15, 2019 1:49 pm
What's your reason for funding the taxable brokerage account and not the 401k? Will those also be buy-and-hold assets untouched until retirement?
Short term expenses/needs. Though there are ways to access the assets in 401(K) early and penalty free, they are not the most straight forward. Roth, I can always take out the contributions and taxable brokerage, I can access contributions/growth.

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celia
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Re: Letting retirement funds grow, without further contribution

Post by celia » Fri Nov 15, 2019 2:04 pm

nwa-non wrote:
Fri Nov 15, 2019 12:53 pm
Let's also assume I've calculated income in retirement is about $48k/year. The $1.5M should be able to fund that income.
In 25 years, today's $48K will have the spending power of today's $20K.

Look up the cost of a loaf of bread, a gallon of gas, and the cost of toilet paper over the last 25 years.

That does not mean you shouldn't save, because you will be way ahead of those who didn't save.

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nwa-non
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Re: Letting retirement funds grow, without further contribution

Post by nwa-non » Fri Nov 15, 2019 2:06 pm

runner540 wrote:
Fri Nov 15, 2019 1:47 pm
Ok, thought exercise: What are you going to do with your 401k contribution amount (without the tax shield), that is worth more to you than greater spending in retirement, or an earlier retirement, or one with less risk?
Fantastic question! Any one of the following scenarios:
1. That source of income will not be there (either fully or partially) anymore
2. Invest in either Roth and taxable brokerage accounts.
3. Mix of 1 and 2
Last edited by nwa-non on Fri Nov 15, 2019 5:30 pm, edited 2 times in total.

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JoeRetire
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Re: Letting retirement funds grow, without further contribution

Post by JoeRetire » Fri Nov 15, 2019 2:08 pm

nwa-non wrote:
Fri Nov 15, 2019 12:53 pm
Let's assume the following.
- I'm 40.
- I have $500k in retirement savings.

If I stop funding my retirement right now and don't put in a single cent for the next 25 years, I should (theoretically) end up with over $1.5M in retirement funds with a conservative 4.5% CAGR.

Let's also assume I've calculated <edit:income, wrong> expense in retirement is about $48k/year. The $1.5M should be able to fund that income.

So ....someone convince me why I need to keep funding retirement rather than just let it grow?
What is your estimate for inflation over the remainder of your lifetime?
Do you imagine that $48k will stay constant for the next 50 years or so? Or would it increase with inflation? And would it increase based on healthcare cost increases?
Don't be a lemming.

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nwa-non
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Re: Letting retirement funds grow, without further contribution

Post by nwa-non » Fri Nov 15, 2019 2:17 pm

JoeRetire wrote:
Fri Nov 15, 2019 2:08 pm

What is your estimate for inflation over the remainder of your lifetime?
Do you imagine that $48k will stay constant for the next 50 years or so? Or would it increase with inflation? And would it increase based on healthcare cost increases?
Remainder of my lifetime is reaaally broad. Let's just say I'm looking at inflation of 2-3% for the forseable future.
No, the $48k would remain same nominally in today's dollars and increase with inflation. My assumptions have healthcare costs baked in (whether it is correct or not, is anybody's guess :D)

dbr
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Re: Letting retirement funds grow, without further contribution

Post by dbr » Fri Nov 15, 2019 2:19 pm

nwa-non wrote:
Fri Nov 15, 2019 2:17 pm
JoeRetire wrote:
Fri Nov 15, 2019 2:08 pm

What is your estimate for inflation over the remainder of your lifetime?
Do you imagine that $48k will stay constant for the next 50 years or so? Or would it increase with inflation? And would it increase based on healthcare cost increases?
Remainder of my lifetime is reaaally broad. Let's just say I'm looking at inflation of 2-3% for the forseable future.
No, the $48k would remain same nominally in today's dollars and increase with inflation. My assumptions have healthcare costs baked in (whether it is correct or not, is anybody's guess :D)
So, the key question might be do you really want to retire on a spending power of what $20,000 would buy today?

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JoeRetire
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Re: Letting retirement funds grow, without further contribution

Post by JoeRetire » Fri Nov 15, 2019 2:23 pm

nwa-non wrote:
Fri Nov 15, 2019 2:17 pm
JoeRetire wrote:
Fri Nov 15, 2019 2:08 pm

What is your estimate for inflation over the remainder of your lifetime?
Do you imagine that $48k will stay constant for the next 50 years or so? Or would it increase with inflation? And would it increase based on healthcare cost increases?
Remainder of my lifetime is reaaally broad. Let's just say I'm looking at inflation of 2-3% for the forseable future.
No, the $48k would remain same nominally in today's dollars and increase with inflation. My assumptions have healthcare costs baked in (whether it is correct or not, is anybody's guess :D)
Yup. 50 years (a reasonable guesstimate for the remainder of your life) is a long, long time - longer than you have lived so far.

To have the spending power that $100 had 50 years ago, you would need about $700 today due to inflation. Less than 50 years ago, we saw some years with double-digit inflation and more near double-digits.

And healthcare is constantly changing. The one constant seems to have been increased costs at more than the inflation rate. Who knows what 50 years will bring?

Not that many years ago, I thought $1m was a lot of money to have for retirement. Now, not so much.

That's why it's iffy to just stop contributing at such an early age.
Last edited by JoeRetire on Fri Nov 15, 2019 2:28 pm, edited 4 times in total.
Don't be a lemming.

GoldenFinch
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Re: Letting retirement funds grow, without further contribution

Post by GoldenFinch » Fri Nov 15, 2019 2:23 pm

Don’t give up that Roth IRA space. All of the tax free growth you will get if you keep contributing, don’t pass that up. Also, if you’re getting a 401K match, don’t skip the free money. That’s just my two cents. Here’s my third cent - you don’t want to look back and have regrets. Any spending you do now will likely be forgotten, but you will have a lot of security and options in the future if you keep on saving. Good luck with your choices.

dboeger1
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Re: Letting retirement funds grow, without further contribution

Post by dboeger1 » Fri Nov 15, 2019 2:35 pm

When I was young, my uncle used to say something to encourage me to study. He admittedly didn't use very politically correct or even fair or accurate terms, but I'll quote him anyway because I think his intent was good: "The nice thing about being smart is that you can always choose to be stupid later for free, but stupid people can't choose to be smart later."

To be clear, I disagree with the statement, at least with regards to intelligence, which I think he confused with knowledge, haha, but the point still stands; extra money isn't going to hurt you later in life. I'm sure you'll be glad to have it. If you need it, you'll be grateful. If not, you'll get to enjoy life or pass it on to your descendants or donate to charity that much more. Either way, it's a win. The only way to lose is if you give up too early and realize you don't have enough after it's too late.

I'm not saying there's no merit to your hypothetical end of contributions. After all, one of the biggest motivators for me to start investing early was when I discovered the power of compound interest, and how the earlier I invested a dollar, the more it would take care of me later in life. If I didn't care about reducing my work load at all and planned to work until the day I died, then I wouldn't bother investing. The whole point of all of this is to live comfortably later on. So yes, at some point, I could see having enough to call it quits with retirement funds and either start spending now or cut my workload. But I think what you're getting from all the responses is that there are just too many unknowns, and you want to build yourself enough of a margin that you feel really confident. Don't leave it up to a die roll whether you retire comfortably or not. You might end up with unexpected medical costs, family hardships, hyperinflation, or any number of other things which could erode the value of your retirement funds.

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nwa-non
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Re: Letting retirement funds grow, without further contribution

Post by nwa-non » Fri Nov 15, 2019 2:40 pm

GoldenFinch wrote:
Fri Nov 15, 2019 2:23 pm
Don’t give up that Roth IRA space. All of the tax free growth you will get if you keep contributing, don’t pass that up. Also, if you’re getting a 401K match, don’t skip the free money. That’s just my two cents. Here’s my third cent - you don’t want to look back and have regrets. Any spending you do now will likely be forgotten, but you will have a lot of security and options in the future if you keep on saving. Good luck with your choices.
Thanks GoldenFinch! Yes, tax free growth of Roth IRA has to be considered. Also, the employer match of 401(k) is the absolute minimum to go on the contribution, IF there is an income.

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Re: Letting retirement funds grow, without further contribution

Post by KlangFool » Fri Nov 15, 2019 2:46 pm

nwa-non wrote:
Fri Nov 15, 2019 1:58 pm
KlangFool wrote:
Fri Nov 15, 2019 1:51 pm
<<Second, when I said "without further contribution", I meant only to the 401(k). The plan would be to still fund Roth, and taxable brokerage account.>>

1) 401K is not a retirement account. It is a tax-advantaged account. You can withdraw the money from 401K penalty-free before 59 1/2 years old.

2) Why would you want to do that? You would be paying a lot more taxes unnecessary. Unless you enjoy paying taxes instead of spending your own money, why would you do that?

KlangFool
1. 401(k) is tax advantaged retirement account. And yes, I know of the ways to get that money penalty free if I need it. Thanks!

2. Tax bracket will certainly be going down, if and when this scenario comes to fruition. I'm ok with paying a little more in tax now and let the growth (Roth) be tax free.
nwa-non,

2) A) That does not explain why are you investing in the taxable account.

B) Why do you think that it is a little more taxes? What is your marginal tax rate? What is your state income tax rate?

KlangFool

Shamb3
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Re: Letting retirement funds grow, without further contribution

Post by Shamb3 » Fri Nov 15, 2019 4:16 pm

If you start spending that money, you are going to need a bigger nest egg to support the new level of spending.

If you keep investing, you can either
retire earlier or take more vacations and buy more toys in retirement


I am 40, and i have done the theoretical math for myself.
If I invest nothing for the next 20 years I will have about 1.5 - 2 million.
If I keep investing at the same rate, I can retire at 52-55 with 2 million if I want to or work less at 52 or keep working and spend more or whatever I want.
Last edited by Shamb3 on Fri Nov 15, 2019 4:27 pm, edited 1 time in total.

aristotelian
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Re: Letting retirement funds grow, without further contribution

Post by aristotelian » Fri Nov 15, 2019 4:21 pm

-Future returns are not guaranteed. The market could be negative for a long time.
-Inflation will offset some of your gains.
-You may wish to retire early. The more money you save now, the more options you will have.

AHTFY
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Re: Letting retirement funds grow, without further contribution

Post by AHTFY » Fri Nov 15, 2019 4:35 pm

I don't disagree with your assumption regarding already having enough saved to retire as far as it goes relating to your asset allocation. If you've already won the game, as they say, or have a better than 50% of having already won based on the expected CAGR of your portfolio, it might make sense to already set your asset allocation to how you'd want it to be in retirement. No reason to stay aggressive in your allocation if you don't have to and would prefer something safer.

However, I would not rely on these same assumptions regarding saving for retirement. If you want to use the same methodology, I would use the most realistic conservative CAGR possible. If you have 25 years to retirement, see how your portfolio did in the worst (or near worst) case. A quick look at the SIMBA spreadsheet shows that in the worst 25-year period a 100% stock portfolio had a real CAGR of 2.23% and a 60-40 portfolio had a real CAGR of 1.87%. At the 5th percentile, the numbers are 3.42% and 2.75%. Those figures are much lower than your assumed 4.5% real CAGR.

With your $500k, using those CAGRs give you a portfolio of between $794k and $1.16M at age 65. So you are still short, and that's assuming your numbers are correct (you work until you are 65, your prediction of annual expenses 25 years down the road is correct).

Either way, it looks like you are in a great position.

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zaboomafoozarg
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Re: Letting retirement funds grow, without further contribution

Post by zaboomafoozarg » Fri Nov 15, 2019 4:41 pm

This is a tactic some people use called CoastFI.

They'll save/invest enough money to ensure their minimum desired level of retirement income.

Then they typically switch to a job that they find more rewarding but pays less, and either partially or completely stop saving for retirement.

Warning: if you spend 100% of your income and live on a large amount of money during your working years, it will probably be difficult to transition to less during your retirement years.

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GerryL
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Re: Letting retirement funds grow, without further contribution

Post by GerryL » Fri Nov 15, 2019 4:54 pm

For years I maintained a spreadsheet with multiple scenarios for growth of my investments based on amount invested each year and assumed growth. Each year I checked to see if actuals were keeping up with the numbers on the spreadsheet.

When things started getting iffy at work, and I was looking at possibly being downsized, I added a set of columns for $0 invested each year. I was well into my 50s by this time and was relieved to see that I would have enough without further investment. Fortunately, the job held steady, but it was comforting to see that I was going to be okay even if I had to stop contributing to investment accounts.

Is this the kind of thought experiment you are doing?

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nwa-non
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Re: Letting retirement funds grow, without further contribution

Post by nwa-non » Fri Nov 15, 2019 5:00 pm

zaboomafoozarg wrote:
Fri Nov 15, 2019 4:41 pm
This is a tactic some people use called CoastFI.

They'll save/invest enough money to ensure their minimum desired level of retirement income.

Then they typically switch to a job that they find more rewarding but pays less, and either partially or completely stop saving for retirement.

Warning: if you spend 100% of your income and live on a large amount of money during your working years, it will probably be difficult to transition to less during your retirement years.
CoastFI - Exactly!

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nwa-non
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Re: Letting retirement funds grow, without further contribution

Post by nwa-non » Fri Nov 15, 2019 5:03 pm

GerryL wrote:
Fri Nov 15, 2019 4:54 pm
For years I maintained a spreadsheet with multiple scenarios for growth of my investments based on amount invested each year and assumed growth. Each year I checked to see if actuals were keeping up with the numbers on the spreadsheet.

When things started getting iffy at work, and I was looking at possibly being downsized, I added a set of columns for $0 invested each year. I was well into my 50s by this time and was relieved to see that I would have enough without further investment. Fortunately, the job held steady, but it was comforting to see that I was going to be okay even if I had to stop contributing to investment accounts.

Is this the kind of thought experiment you are doing?
Kind of, "zaboomafoozarg" probably got it. Taking it a step further, what if I stop FT work right now all together? (with other income covering expenses)

dharrythomas
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Re: Letting retirement funds grow, without further contribution

Post by dharrythomas » Fri Nov 15, 2019 5:27 pm

If you are on track, there is no reason that you can’t cut back some. You do need to consider that adding to current spending will add to future requirements to maintain the same standard of living.

I’d recommend that you cut back from what is going into the brokerage account and consider the Roth option on the 401(k) instead of just stopping the tax deferred contributions.

We’ve cut back significantly on what we set aside, not as much as DW would like but as much as I was comfortable with. Don’t squeeze yourself too tightly, all things in moderation.

Good luck.

sls239
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Re: Letting retirement funds grow, without further contribution

Post by sls239 » Fri Nov 15, 2019 6:08 pm

Is there a match? Do you need reduce your AGI? Would a contribution qualify for the retirement savers tax credit?

In short - never turn down free money.

ExitStageLeft
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Re: Letting retirement funds grow, without further contribution

Post by ExitStageLeft » Fri Nov 15, 2019 7:10 pm

https://firecalc.com/
$500k at default settings grows to ~$2M after 25 years. 95% of scenarios succeed with a 30-year retirement spending at $79k annually. That's in real dollars.

http://cfiresim.com/
Same data, same result. Annual spend of $79k.

https://www.portfoliovisualizer.com/financial-goals
Save $500k at 75/25 allocation, for 25 years then spend $80k per year for next 30 years. 9977 portfolios out of 10000 simulated portfolios (99.77%) survived all withdrawals.

It's not a crazy idea, assuming the future is not radically different from the past. There may be more optimal ways to reach your retirement goals. Agree with others that you should check that assumption of working for 25 more years. I would also look at what it would take to allow you to stop working in 15 or 20 years.

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nwa-non
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Re: Letting retirement funds grow, without further contribution

Post by nwa-non » Sat Nov 30, 2019 10:56 pm

ExitStageLeft wrote:
Fri Nov 15, 2019 7:10 pm
https://www.portfoliovisualizer.com/financial-goals
Save $500k at 75/25 allocation, for 25 years then spend $80k per year for next 30 years. 9977 portfolios out of 10000 simulated portfolios (99.77%) survived all withdrawals.

It's not a crazy idea, assuming the future is not radically different from the past. There may be more optimal ways to reach your retirement goals. Agree with others that you should check that assumption of working for 25 more years. I would also look at what it would take to allow you to stop working in 15 or 20 years.
Thanks you @ExitStageLeft! I'm very comfortable with any simulation that gives a 99% success rate. Heck, I've quite comfortable with a 80% success rate.

As I've mentioned in the OP, there are assumptions built into the question. I'm not 40 (younger), don't have $500k in 401(k) (have more), and nowhere have I said I'm going work for the next 25 years :D

The basic plan is to retire early, in the next few months, and not touch the 401(k) for the next 25 years.

EnjoyIt
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Re: Letting retirement funds grow, without further contribution

Post by EnjoyIt » Sat Nov 30, 2019 11:29 pm

nwa-non wrote:
Sat Nov 30, 2019 10:56 pm
ExitStageLeft wrote:
Fri Nov 15, 2019 7:10 pm
https://www.portfoliovisualizer.com/financial-goals
Save $500k at 75/25 allocation, for 25 years then spend $80k per year for next 30 years. 9977 portfolios out of 10000 simulated portfolios (99.77%) survived all withdrawals.

It's not a crazy idea, assuming the future is not radically different from the past. There may be more optimal ways to reach your retirement goals. Agree with others that you should check that assumption of working for 25 more years. I would also look at what it would take to allow you to stop working in 15 or 20 years.
Thanks you @ExitStageLeft! I'm very comfortable with any simulation that gives a 99% success rate. Heck, I've quite comfortable with a 80% success rate.

As I've mentioned in the OP, there are assumptions built into the question. I'm not 40 (younger), don't have $500k in 401(k) (have more), and nowhere have I said I'm going work for the next 25 years :D

The basic plan is to retire early, in the next few months, and not touch the 401(k) for the next 25 years.
That comment may change everything.

If you are 1/3 of the way there I would not change course. If you are 70-80% there, then stepping back and transitioning to easier work sounds like a reasonable plan.

The only caveat I can tell you is that very likely your expenses will rise a bit over the years. You will be getting older and you will find reasons to spend a little extra. It is human nature. I would try and make a scenario that will allow for a small amount of lifestyle creep into your expenses.

The other thing that scares me a bit is relying on Obamacare for health insurance. Frankly I hate the uncertainty and therefor budget to cover my own health insurance.

BTW, we semi-retired in our 40s. Interestingly enough, our expenses have gone up a bit. Luckily we are still working some so it allows our portfolio to grow.

Either way, congrats on getting yourself into a position to make these choices. Good luck with whatever you decide to do.

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