Approaching 40, worried about financial future

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crinkles2
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Approaching 40, worried about financial future

Post by crinkles2 » Sat May 23, 2020 12:39 am

I am about to turn 40 in a year or so. Recently I have become ever more worried about my/our future.

I earn about $83,000. My retirement accounts are about $111,000. I am for 67/33 stock and bond approach.

We are a family of 5 (3 kids). My partner does not work.

I currently save about 8.7% of gross to tax advantaged accounts. I know this is too low.

We are working on reducing costs, including downsizing property and looking at selling one of our two cars.

I feel like we have no traction and like we are way behind where we need to (or could be). However, living costs are high. You can say we are currently house poor. In the downsizing we have used bridging finance and essentially all of our cash is locked up in bricks and mortar now - have no emergency fund as a result until the old house sells. The effect of the virus on the sale is being felt in little buyer's interest, although we are about to get a second inspection by prospective buyer in about three weeks of listing.

I worry that reading about people who are about to retire with $1m to $2m - that we'd never get there!

Any advice or words of wisdom would be great.

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whodidntante
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Re: Approaching 40, worried about financial future

Post by whodidntante » Sat May 23, 2020 12:58 am

crinkles2 wrote:
Sat May 23, 2020 12:39 am
I worry that reading about people who are about to retire with $1m to $2m - that we'd never get there!
The majority of people will never have a million dollar pile of securities. Yet, anyone who lives long enough will retire. You make adjustments. There is no shame in it.

But to get to a million and a half or so, it's simple but not easy. First, you need investable cash flow. For all the Boglehead cultism about fees, this is the thing that trips most people up; they just don't save enough. Once you are putting plenty of money away consistently, you should worry about taking appropriate risks. 67/33 is too conservative for me but it's in the range of reasonable. Next, worry about investment costs, including fund expenses and taxes.

Your situation is not that bad. You're better off than some people, and worse off than some people. And you're concerned enough to ask. This site can make you feel inadequate because some high income earners hang out here. Lots of docs and tech geeks. Don't worry about them, worry about you.

Probably the main thing you can do is to improve your investable cash flow, and make sure it gets invested. Cut expenses, increase income, or both. What are your options for doing that? You don't have to tell me, but that's your most important challenge if you want to wake up with a lot of money some day. I can see you are taking steps already.

If you don't, that's fine. As I said before, you make adjustments.

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OptimusPrime
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Re: Approaching 40, worried about financial future

Post by OptimusPrime » Sat May 23, 2020 3:49 am

Yes , don’t worry about some of the numbers banded around on this site, you can only do what you can do in your own situation.

But to improve your situation I recommend Mr Money Moustache website .

https://www.mrmoneymustache.com/

A little extreme in some areas but has some excellent tips.

Also a great book called , The millionaire next door by Thomas J Stanley.

Will help give you ideas to improve your savings rate situation and end any fruitless worry.

chicagoan23
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Re: Approaching 40, worried about financial future

Post by chicagoan23 » Sat May 23, 2020 4:49 am

Need more info. How much are your house(s) worth? Do you have any debt, other than the mortgage?

It sounds to me like you are doing very well for a single income with a good sized family, assuming you are not loaded with debt. Plan for your current nest egg to grow to $600k or so by the time you retire. Savings over the next 25 years should add another $500k. Pay off your house plus social security and you will have a nice retirement.
"The Basic Choices for Investors and the One We Strongly Prefer" | | https://www.berkshirehathaway.com/letters/2011ltr.pdf

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climber2020
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Re: Approaching 40, worried about financial future

Post by climber2020 » Sat May 23, 2020 7:08 am

Can your partner get a job? That would help as long as it’s not cancelled out by new child care expenses.

leo383
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Re: Approaching 40, worried about financial future

Post by leo383 » Sat May 23, 2020 7:16 am

The great majority of people retire with FAR less than $1 million. Yet somehow they do.

This forum is great, but it's a super affluent bubble that can make an average Joe feel inferior in a hurry. Don't let it.

toocold
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Re: Approaching 40, worried about financial future

Post by toocold » Sat May 23, 2020 7:38 am

In the FIRE community, many believe it takes about 10 years to become "FI". The math is easy. Actions are more tough and it seems like you are starting out the journey, which usually begins when people have a similar realization. Mine came when I was 33 - my first was born, we just moved into a new house and we purchased a new car. You are in no way behind and I would advise not to compare yourself.

You may want to listen to the guys at ChooseFI podcast. It's free :)

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Cyclesafe
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Re: Approaching 40, worried about financial future

Post by Cyclesafe » Sat May 23, 2020 7:52 am

You are still young enough and you have woken up. You'll be fine if you follow the advice offered here. The economic situation will improve - eventually.

In my view, 67% equity is aggressive enough. After the market returns, perhaps re-evaluate your risk tolerance. Don't do anything now.

Keep an eye on your cash flow and try to build up your emergency fund. Cut back where you can, but don't do without necessities.

I think you should be proud of where you are. It's a bit of a rough patch now, but in a few years you should be well on your way to a healthy financial future.
"Plans are useless; planning is indispensable.” (Dwight Eisenhower) | "Man plans, God laughs" (Yiddish proverb)

WarAdmiral
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Re: Approaching 40, worried about financial future

Post by WarAdmiral » Sat May 23, 2020 7:55 am

OptimusPrime wrote:
Sat May 23, 2020 3:49 am

Also a great book called , The millionaire next door by Thomas J Stanley.
+ 1 Read this book. It will re-energize you.

sailaway
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Re: Approaching 40, worried about financial future

Post by sailaway » Sat May 23, 2020 8:25 am

You just are not really behind right now. Give yourself the credit you deserve.

Your biggest concern at the moment should be the lack of emergency fund. However, if your plan allows for it, you can probably cancel your 401k contribution and have a decent chunk of money in your next paycheck, if needed. That won't help for job loss, but it is something to fall back on, at least.

Once your old house has sold, what is your plan for the cash? Does it fit with the order of investments?

By addressing housing and transportation, you are looking at two large chunks of the budget. How are you doing on food and other expenses?

For most people the budget buster is not considering lumpy expenses, be that annual expenses like insurance or decade expenses like car replacement or house repairs.

Have you looked at your projected SS payments? How do they compare to your expenses?

When going through frugal tips, compare them to your own priorities, but be willing to challenge yourself. Be sure that cuts aren't nullified by increased expenses elsewhere. That is, if you eat out less, your grocery bill.may go up, but probably by less than you were spending. But if you cut cable and let the kids buy ebooks to fill their time, you may be spending more overall.

New Providence
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Re: Approaching 40, worried about financial future

Post by New Providence » Sat May 23, 2020 9:02 am

climber2020 wrote:
Sat May 23, 2020 7:08 am
Can your partner get a job? That would help as long as it’s not cancelled out by new child care expenses.

This, as long as your partner can get a job with a 401K and medical benefits. No doubt that your partner's salary will be cancelled out by the new child care expenses (it is 3 kids after all), but the gain will be another 401K and another source of health insurance in case you lose your job.

Thegame14
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Re: Approaching 40, worried about financial future

Post by Thegame14 » Sat May 23, 2020 1:53 pm

"partner" is going to have to go back to work once kids are old enough, dont really see another way....

Savermom
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Re: Approaching 40, worried about financial future

Post by Savermom » Sat May 23, 2020 3:43 pm

I don’t know what kind of retirement accounts you have. I would do your 401k (Roth 401k if your plan allows them) enough for the matching, then do a Roth IRA. If you and your partner are married, your partner can also do a Roth IRA contribution. My husband’s 401k has high fees, so I always max out our Roth IRAs- I put enough in his 401k for the matching. Good luck, you have time on your side. Keep saving and investing!

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Watty
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Re: Approaching 40, worried about financial future

Post by Watty » Sat May 23, 2020 3:57 pm

crinkles2 wrote:
Sat May 23, 2020 12:39 am
I worry that reading about people who are about to retire with $1m to $2m - that we'd never get there!

Any advice or words of wisdom would be great.
You do not need anywhere near that for a comfortable retirement especially if you do not live in a expensive part of the country. Here is a post I did when I was getting ready to retire about five years ago.

viewtopic.php?f=1&t=167664
crinkles2 wrote:
Sat May 23, 2020 12:39 am
We are a family of 5 (3 kids). My partner does not work.
Life is complicated.

If this is a long term relationship sure to figure out what you are giving up by not be being married.

If you were married they you might have to pay less in taxes and your the survivor might be able to get Social Security if one of you dies. If you get divorced you need to have been married for 10 years for the lower earning spouse to be able to claim Social Security based on the higher earners history. This does not cost the higher earner anything. That ten year clock does not start until you get married.

There can be lots of other factors but be sure to at least understand all the financial ramifications.

RadAudit
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Re: Approaching 40, worried about financial future

Post by RadAudit » Sat May 23, 2020 5:00 pm

crinkles2 wrote:
Sat May 23, 2020 12:39 am
I am about to turn 40 in a year or so. Recently I have become ever more worried about my/our future.

I earn about $83,000. My retirement accounts are about $111,000. I am for 67/33 stock and bond approach.

We are a family of 5 (3 kids). My partner does not work.
First things first - anyone who looks after 3 kids works.

A little more than 30 years ago and after about sixteen years of saving, I was roughly in a similar situation. (Salary wasn't that high.) I tried to figure out how much I needed to have saved each year in order to reach my goal (enough) to retire. Have a plan. Work the plan. Five months after my last kid graduated from grad school, I retired.

Things will work out.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

Topic Author
crinkles2
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Re: Approaching 40, worried about financial future

Post by crinkles2 » Sat May 23, 2020 6:12 pm

Thanks everyone for your responses.

To clarify, we are married. 'traditional' family structure. I was not precise enough in that wording.

Kids are 9, 11 and 14. Sensitive topic as to her working.

The house we are selling (but still own) is valued at 400k. The house we have bought and where we now live is valued at 350k. The bank has a single note over both of about 78% LTV. Once the selling house sells, the vast majority of the proceeds will be taken by the bank to reduce the note. I am hoping to talk to them about holding back say 30k for our cash. Once this process is complete the LTV on the new condo should be about 55-60% and the mortgage payments about $500 per month less (due to resetting of 30 year mortgage and previous mortgage having been a 25 year on larger amount).

The new place is a condo with significantly less maintenance ($500 per month less). So it's a big change. Also, no more private school for the kids.

Edited to add: our health is not great (me lifestyle and fitness issues, her low-level but manageable chronic disease that can take a turn for the worse later in life). So I question our longevity past say 65-70.

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CyclingDuo
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Re: Approaching 40, worried about financial future

Post by CyclingDuo » Sat May 23, 2020 6:17 pm

crinkles2 wrote:
Sat May 23, 2020 12:39 am
I am about to turn 40 in a year or so. Recently I have become ever more worried about my/our future.

I earn about $83,000. My retirement accounts are about $111,000. I am for 67/33 stock and bond approach.

We are a family of 5 (3 kids). My partner does not work.

I currently save about 8.7% of gross to tax advantaged accounts. I know this is too low.

We are working on reducing costs, including downsizing property and looking at selling one of our two cars.

I feel like we have no traction and like we are way behind where we need to (or could be). However, living costs are high. You can say we are currently house poor. In the downsizing we have used bridging finance and essentially all of our cash is locked up in bricks and mortar now - have no emergency fund as a result until the old house sells. The effect of the virus on the sale is being felt in little buyer's interest, although we are about to get a second inspection by prospective buyer in about three weeks of listing.

I worry that reading about people who are about to retire with $1m to $2m - that we'd never get there!

Any advice or words of wisdom would be great.
In our opinion and experience...

You simply have got to increase the household income and become a dual income couple.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

Savermom
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Re: Approaching 40, worried about financial future

Post by Savermom » Sat May 23, 2020 6:39 pm

I understand how your wife feels, and I would not pressure her to get a job. It is work taking care of a family and a house. I would advise supporting your wife on her role as a
mom and just asking her to help you cut expenses and save right now. Your support would mean a lot to her.

go_mets
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Re: Approaching 40, worried about financial future

Post by go_mets » Sat May 23, 2020 6:40 pm

I think you'll be less worries once your other house sells.
It is worrisome especially in these times.

Many immigrant families earn less and but they save save save.
No eating out.
No expensive cable.
No expensive smartphones.
etc etc


.

sd323232
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Re: Approaching 40, worried about financial future

Post by sd323232 » Sat May 23, 2020 7:04 pm

crinkles2 wrote:
Sat May 23, 2020 6:12 pm
Thanks everyone for your responses.

To clarify, we are married. 'traditional' family structure. I was not precise enough in that wording.

Kids are 9, 11 and 14. Sensitive topic as to her working.

The house we are selling (but still own) is valued at 400k. The house we have bought and where we now live is valued at 350k. The bank has a single note over both of about 78% LTV. Once the selling house sells, the vast majority of the proceeds will be taken by the bank to reduce the note. I am hoping to talk to them about holding back say 30k for our cash. Once this process is complete the LTV on the new condo should be about 55-60% and the mortgage payments about $500 per month less (due to resetting of 30 year mortgage and previous mortgage having been a 25 year on larger amount).

The new place is a condo with significantly less maintenance ($500 per month less). So it's a big change. Also, no more private school for the kids.

Edited to add: our health is not great (me lifestyle and fitness issues, her low-level but manageable chronic disease that can take a turn for the worse later in life). So I question our longevity past say 65-70.
I never understood why people send their kids to private school. I have never met anyone successful whose success was based on private school, hard working person will succeed private school or not private school. I met alot of successful people who went through military service, which probably has more positive influence than all private schools combined.

dandinsac
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Re: Approaching 40, worried about financial future

Post by dandinsac » Sat May 23, 2020 7:32 pm

With 15-20 years of employment ahead of you, your biggest asset is your earning potential. The most important thing for your family to get to a good financial future is your ability to stay employed and earn more income.

To do this, make sure you are in an industry that grows. It's challenging to get salary increases above inflation in general. If you're in an industry that isn't growing or can be outsourced overseas, start planning on how to change your role or industry to minimize that.

If your industry and role is good, take the effort to earn certifications, taking online classes, etc. to stay current and become a more valuable employee. (This also helps you become more sought after by other employers who will pay you more to join them.)

mighty72
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Re: Approaching 40, worried about financial future

Post by mighty72 » Sat May 23, 2020 8:25 pm

We were like you about 5 years ago. We started tracking all our expenses and believe me it helps. We use ynab; it is never a hard limit on any one category except we never cheat on savings and always set money aside for recurring expenses like phone, utilities, property tax, insurance, etc. What is left is what we spend on leisure. It is not easy at first and takes commitment from everyone in the family. However, it works. 5 years can make a big difference and as you savings go up, you will see that income from savings starts adding up & compounding takes over.

chicagoan23
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Re: Approaching 40, worried about financial future

Post by chicagoan23 » Sat May 23, 2020 10:34 pm

crinkles2 wrote:
Sat May 23, 2020 6:12 pm
Thanks everyone for your responses.

To clarify, we are married. 'traditional' family structure. I was not precise enough in that wording.

Kids are 9, 11 and 14. Sensitive topic as to her working.

The house we are selling (but still own) is valued at 400k. The house we have bought and where we now live is valued at 350k. The bank has a single note over both of about 78% LTV. Once the selling house sells, the vast majority of the proceeds will be taken by the bank to reduce the note. I am hoping to talk to them about holding back say 30k for our cash. Once this process is complete the LTV on the new condo should be about 55-60% and the mortgage payments about $500 per month less (due to resetting of 30 year mortgage and previous mortgage having been a 25 year on larger amount).

The new place is a condo with significantly less maintenance ($500 per month less). So it's a big change. Also, no more private school for the kids.

Edited to add: our health is not great (me lifestyle and fitness issues, her low-level but manageable chronic disease that can take a turn for the worse later in life). So I question our longevity past say 65-70.
You don’t need to do anything more than what you are doing now. Your housing costs are reasonable and you will have significant equity in your primary residence, you don’t have significant non-mortgage debt, your kids are getting older and you are giving them a great start in life.

Think about the Rule of 72. At age 50, your current savings will have grown to $250k, at age 60, $500k, age 65 maybe $700k. You still have 25 years of working and saving which may double that number. Your house will be paid off and when your kids leave the house you can cash out and downsize again. If your current trends continue you have a good shot at a net worth of $2 million in 25 or 30 years, plus SS.

Just stay diligent about working and saving, don’t panic during market crashes and continue to live below your means. It’s a marathon, not a sprint.
"The Basic Choices for Investors and the One We Strongly Prefer" | | https://www.berkshirehathaway.com/letters/2011ltr.pdf

DonIce
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Re: Approaching 40, worried about financial future

Post by DonIce » Sat May 23, 2020 10:48 pm

leo383 wrote:
Sat May 23, 2020 7:16 am
The great majority of people retire with FAR less than $1 million. Yet somehow they do.

This forum is great, but it's a super affluent bubble that can make an average Joe feel inferior in a hurry. Don't let it.
Heh, even in saying this, the super affluent bubble is reinforced. The OP makes $83k, which is more than double the "average Joe". In fact it puts him in the top 20%.

To the OP: try boosting your savings rate from 8.7%, by 1% per year. Maybe target 10% this year, 11% next year, etc. A good way to do this without feeling like you are making sacrifices is any time you get a raise, put most of the increase towards higher savings rate rather than increasing lifestyle. Much easier to reduce how much you increase lifestyle rather than cutting back.

Also, don't forget about SS. When your kids move out, your expenses will be a lot lower. Chances are social security will cover most of you and your wife's living expenses even if you don't have much of a retirement portfolio.

wolf359
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Re: Approaching 40, worried about financial future

Post by wolf359 » Sat May 23, 2020 10:55 pm

crinkles2 wrote:
Sat May 23, 2020 6:12 pm
Thanks everyone for your responses.

To clarify, we are married. 'traditional' family structure. I was not precise enough in that wording.

Kids are 9, 11 and 14. Sensitive topic as to her working.

The house we are selling (but still own) is valued at 400k. The house we have bought and where we now live is valued at 350k. The bank has a single note over both of about 78% LTV. Once the selling house sells, the vast majority of the proceeds will be taken by the bank to reduce the note. I am hoping to talk to them about holding back say 30k for our cash. Once this process is complete the LTV on the new condo should be about 55-60% and the mortgage payments about $500 per month less (due to resetting of 30 year mortgage and previous mortgage having been a 25 year on larger amount).

The new place is a condo with significantly less maintenance ($500 per month less). So it's a big change. Also, no more private school for the kids.

Edited to add: our health is not great (me lifestyle and fitness issues, her low-level but manageable chronic disease that can take a turn for the worse later in life). So I question our longevity past say 65-70.
Assuming $111,000 current retirement accounts, $602 contributed per month, and a 6% compounded growth rate, you will hit $1,044,174 at your full retirement age of 67 according to a compound interest calculator.

The good news: If you and your spouse truly pass away at 70, then you will have more than enough to support a 3 year retirement!

The other good news: Your youngest child is 9 while you are nearly 40. That means your youngest will finish college while you are still around 50. Your savings rate will start increasing as your kids leave the house (or finish college, depending upon your intentions.) You then have ten or more years to increase your retirement savings beyond this projected million dollar amount.

The good but bad news: It is likely that you are underestimating your life expectancy. If you're wrong, your money has to support one or both of you at 65 and beyond. Make sure you have level term life insurance on both you and your spouse in case you're right. Pick an amount that will allow you to complete your retirement plan in case one of you dies earlier than expected.

The actual bad news: You will be working for another 27 years. If you want to speed this up, your household has to earn more or spend less or both. There's no arguing with the math. If you intend to remain a single income household, that's a valid lifestyle choice -- but it may mean your second income has to be from you having a side hustle or a second job. Or it could mean that you have to study more to qualify for a better position, or otherwise get a promotion, etc. Alternatively, you could spend less. In a traditional household, the husband focuses on great offense (earning more) and the wife focuses on great defense (spending very efficiently and squeezing every penny.) (You really should read "The Millionaire Next Door." Most millionaire households Dr. Stanley profiles are traditional single income households.)

As for your comment on health and lifestyle: You have to improve your health and take care of yourself. Investing in your health is more important to your future happiness than money. If you have a lot of money but poor health (or dead), the money will be worthless to you.

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climber2020
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Re: Approaching 40, worried about financial future

Post by climber2020 » Sat May 23, 2020 11:13 pm

DonIce wrote:
Sat May 23, 2020 10:48 pm
The OP makes $83k, which is more than double the "average Joe". In fact it puts him in the top 20%.
And he lives in a 350k house. There's the problem. Cutting the cable bill and avoiding the $5 coffee is only going to do so much when you live in a house that's over 4x annual income and have 3 kids.

harrychan
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Re: Approaching 40, worried about financial future

Post by harrychan » Sat May 23, 2020 11:29 pm

Great advice so far. How long have you been at the same job? How's the job market? Does it have any sort of pension or fringe benefits? I have friends whose kid's college are taken care of because both parents are in the police force and another friend who works at a university.
This is not legal or certified financial advice but you know that already.

harrychan
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Re: Approaching 40, worried about financial future

Post by harrychan » Sat May 23, 2020 11:30 pm

duplicate
Last edited by harrychan on Sun May 24, 2020 4:42 pm, edited 1 time in total.
This is not legal or certified financial advice but you know that already.

BeneIRA
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Re: Approaching 40, worried about financial future

Post by BeneIRA » Sat May 23, 2020 11:43 pm

climber2020 wrote:
Sat May 23, 2020 11:13 pm
DonIce wrote:
Sat May 23, 2020 10:48 pm
The OP makes $83k, which is more than double the "average Joe". In fact it puts him in the top 20%.
And he lives in a 350k house. There's the problem. Cutting the cable bill and avoiding the $5 coffee is only going to do so much when you live in a house that's over 4x annual income and have 3 kids.
I agree. The OP is definitely house poor. I don't think it's a income problem, it's a fixed expenses are too high problem. The maximum house I would have bought would be in the $250,000 to $275,000 range on that income. No desirable houses at that price? I would have rented, especially with one kid going to college in a few years and the others not far behind. I can't imagine you believe you will be in that house in ten years, right? Going from three kids to no kids and having the same housing needs seems unlikely to me, especially with the health problems.

I am fine with the 67/33 allocation. Jack Bogle forever said "age in bonds." The OP more or less has age in bonds, so, if that's the risk tolerance, then okay. Cutting the private school and saving that money is great. No emergency fund is not. Do whatever you can to get that up to at least three months of expenses. Maybe your spouse won't work now, but is there a compromise? There are tons of work from home jobs now, maybe she will take one of those? As the kids get older, will that open up maybe a part-time work opportunity? Best of luck.

EDIT: Forgot to ask if your job is secure or if a layoff is possible?

smitcat
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Re: Approaching 40, worried about financial future

Post by smitcat » Sun May 24, 2020 7:43 am

crinkles2 wrote:
Sat May 23, 2020 6:12 pm
Thanks everyone for your responses.

To clarify, we are married. 'traditional' family structure. I was not precise enough in that wording.

Kids are 9, 11 and 14. Sensitive topic as to her working.

The house we are selling (but still own) is valued at 400k. The house we have bought and where we now live is valued at 350k. The bank has a single note over both of about 78% LTV. Once the selling house sells, the vast majority of the proceeds will be taken by the bank to reduce the note. I am hoping to talk to them about holding back say 30k for our cash. Once this process is complete the LTV on the new condo should be about 55-60% and the mortgage payments about $500 per month less (due to resetting of 30 year mortgage and previous mortgage having been a 25 year on larger amount).

The new place is a condo with significantly less maintenance ($500 per month less). So it's a big change. Also, no more private school for the kids.

Edited to add: our health is not great (me lifestyle and fitness issues, her low-level but manageable chronic disease that can take a turn for the worse later in life). So I question our longevity past say 65-70.
Checking a few things:
You are 40 or so and your gross income is about $83K.
You are raising 3 kids and in the middle of swapping homes
You save 8.7% of gross or about $7,200/yr
Your FICA should be about $6,350/yr.

Do you know what your taxes & expenses breakdown are based on the $70K left each year? (83-7.2-6.35 = 69.45)
Do you know which of these expenses will be relevant when you retire? (no children, no taxes, no mortgage, no job commute , etc)
Do you know what your current projected SS benefit are for each for you at ages 62,67 and 70 based on your earnings?

I believe that once you gather some of this information and begin forming a plan the task in front of you will not seem so incredibly hard and you will not worry nearly as much. Gather information/form a plan/ execute the plan and most importantly have fun in life.

Valuethinker
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Re: Approaching 40, worried about financial future

Post by Valuethinker » Sun May 24, 2020 8:09 am

crinkles2 wrote:
Sat May 23, 2020 12:39 am
I am about to turn 40 in a year or so. Recently I have become ever more worried about my/our future.

I earn about $83,000. My retirement accounts are about $111,000. I am for 67/33 stock and bond approach.

We are a family of 5 (3 kids). My partner does not work.

I currently save about 8.7% of gross to tax advantaged accounts. I know this is too low.

We are working on reducing costs, including downsizing property and looking at selling one of our two cars.

I feel like we have no traction and like we are way behind where we need to (or could be). However, living costs are high. You can say we are currently house poor. In the downsizing we have used bridging finance and essentially all of our cash is locked up in bricks and mortar now - have no emergency fund as a result until the old house sells. The effect of the virus on the sale is being felt in little buyer's interest, although we are about to get a second inspection by prospective buyer in about three weeks of listing.

I worry that reading about people who are about to retire with $1m to $2m - that we'd never get there!

Any advice or words of wisdom would be great.
If you already *own* 2 vehicles how much do you save by getting rid of one?

You have already taken the depreciation hit on those cars. Until they become so old that they require expensive repairs your main additional costs are licensing + gas?

I just think, particularly with 3 kids, that in most North American suburbs, it's really hard to live with one car. You take your son fot hockey league practice or daughter for soccer and that's Saturday gone - who does the groceries, then? It goes to the hardware, or takes another child to art school?

I am all for frugality. Driving less means lower gas and maintenance Bill's. But if you have a car then you have in effect already paid the depreciation on it. So run it into the ground?

whereskyle
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Re: Approaching 40, worried about financial future

Post by whereskyle » Sun May 24, 2020 8:11 am

crinkles2 wrote:
Sat May 23, 2020 12:39 am
I am about to turn 40 in a year or so. Recently I have become ever more worried about my/our future.

I earn about $83,000. My retirement accounts are about $111,000. I am for 67/33 stock and bond approach.

We are a family of 5 (3 kids). My partner does not work.

I currently save about 8.7% of gross to tax advantaged accounts. I know this is too low.

We are working on reducing costs, including downsizing property and looking at selling one of our two cars.

I feel like we have no traction and like we are way behind where we need to (or could be). However, living costs are high. You can say we are currently house poor. In the downsizing we have used bridging finance and essentially all of our cash is locked up in bricks and mortar now - have no emergency fund as a result until the old house sells. The effect of the virus on the sale is being felt in little buyer's interest, although we are about to get a second inspection by prospective buyer in about three weeks of listing.

I worry that reading about people who are about to retire with $1m to $2m - that we'd never get there!

Any advice or words of wisdom would be great.
I wonder if you have tried investing your pennies. My wife and I earn a similar amount and we take pains to increase our savings rate. Basically, I have two automated investments (work plan and weekly Vanguard contributions). On top of that, I try to throw at least $10 in the market everyday. I can't do it everyday. Sometimes I have to hold onto my pennies to make sure I can pay bills, but most days I can put $10 in and my checking account doesn't notice it. If I do it 15 days a month, that's $150 per month additional or almost $2k extra per year. Contributions this small can seem like simple rounding errors (the difference between a summer and winter electricity bill for instance), and yet they add up to a $20k difference in contributions over a 10 year period. Many Bogleheads make it seem like they know their expenses to the last dime, plan and somehow know exactly what their electricity bill will be every month and can plan to invest accordingly. Really, however, I think they just have enough income that it doesn't make as much of a difference. For us, throwing our pennies at the market could mean the difference between a comfortable and threadbare retirement.
"I am better off than he is – for he knows nothing, and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

michaeljc70
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Re: Approaching 40, worried about financial future

Post by michaeljc70 » Sun May 24, 2020 8:13 am

It sounds like you downsized from a $400k house to a $350k one without selling the first one? Are you paying a commission? What are the total costs for closing, moving, taxes/stamps, etc? What about paying the mortgage on both? It doesn't sound like much of a savings on its face.

There is no magic bullet. Your AA is conservative for someone under 40 IMO and that won't help but you need to be where you feel comfortable. The only other things you can do is make more or spend less. Not knowing your ultimate goals I don't even know if you are really behind. Saving 9% of your income is more than most people save. I think reading this site people can lose site of how most people save/live/invest. People on here make more and save more on average than the rest of the population. There are news articles all the time how 1/3 of the country cannot handle a $400 expense.

toocold
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Re: Approaching 40, worried about financial future

Post by toocold » Sun May 24, 2020 8:21 am

The first step would be to track your expenses, down to the penny. It is a good and eye opening exercise. I would do this with your spouse. If you can provide that to this forum, I'm sure people can be more exact on their advice.

deltaneutral83
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Re: Approaching 40, worried about financial future

Post by deltaneutral83 » Sun May 24, 2020 9:07 am

My $0.02: House is too much on income (4x), how is going from $400k to $350k a big difference with costs of move/sale? If it's done, then it's done. Spouse or OP need a side hustle to generate enough side income to get company match/max Roths-HSA. OP is in the 12% tax bracket with plenty of space as well on $83k income with the above the line deductions OP has and the additional $24,400 below. Any raises OP gets OP will be keeping the great majority of them. For me, private schools would have never been in play given the $ details (which may be incomplete) for kids. Car values need to be no more than $12k each and then driven for a while at stated income level. If I am reading between the lines spouse doesn't want to work and even if so, the likely income level wouldn't come close to justifying being away from kids. Side hustles can be the happy medium. Roth/HSA space is precious in this situation, find a way. $10k more per year goes a long way in this situation toward retirement and the tax man isn't looking to kneecap you at this level so take advantage.

JamesJonesJrJr
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Re: Approaching 40, worried about financial future

Post by JamesJonesJrJr » Sun May 24, 2020 9:46 am

I ran some numbers for you. On your current trajectory, I estimate you'll retire at age 75. Here's a link to the report I generated if you'd like to see the projection in detail.

One adjustment you could consider making is increasing your exposure to equities, especially considering your retirement date is still pretty far away. If you make this adjustment, I anticipate you could retire 5 years earlier at age 70. This assumes you've paid off your condo and can comfortably live on $50k after-tax in today's dollars.

Normchad
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Re: Approaching 40, worried about financial future

Post by Normchad » Sun May 24, 2020 10:01 am

whodidntante wrote:
Sat May 23, 2020 12:58 am
crinkles2 wrote:
Sat May 23, 2020 12:39 am
I worry that reading about people who are about to retire with $1m to $2m - that we'd never get there!
The majority of people will never have a million dollar pile of securities. Yet, anyone who lives long enough will retire. You make adjustments. There is no shame in it.

But to get to a million and a half or so, it's simple but not easy. First, you need investable cash flow. For all the Boglehead cultism about fees, this is the thing that trips most people up; they just don't save enough. Once you are putting plenty of money away consistently, you should worry about taking appropriate risks. 67/33 is too conservative for me but it's in the range of reasonable. Next, worry about investment costs, including fund expenses and taxes.

Your situation is not that bad. You're better off than some people, and worse off than some people. And you're concerned enough to ask. This site can make you feel inadequate because some high income earners hang out here. Lots of docs and tech geeks. Don't worry about them, worry about you.

Probably the main thing you can do is to improve your investable cash flow, and make sure it gets invested. Cut expenses, increase income, or both. What are your options for doing that? You don't have to tell me, but that's your most important challenge if you want to wake up with a lot of money some day. I can see you are taking steps already.

If you don't, that's fine. As I said before, you make adjustments.
This is an A+ quality post.

1) Savings rate dominates almost everything else. Save a bunch.
2) Comparison to others can be bewildering. This is the only community on earth where I am “average”.
3) It is simple, but not easy. Just avoid the big mistakes.....

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willthrill81
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Re: Approaching 40, worried about financial future

Post by willthrill81 » Sun May 24, 2020 10:04 am

crinkles2 wrote:
Sat May 23, 2020 12:39 am
I am about to turn 40 in a year or so. Recently I have become ever more worried about my/our future.

I earn about $83,000. My retirement accounts are about $111,000. I am for 67/33 stock and bond approach.

We are a family of 5 (3 kids). My partner does not work.

I currently save about 8.7% of gross to tax advantaged accounts. I know this is too low.

We are working on reducing costs, including downsizing property and looking at selling one of our two cars.

I feel like we have no traction and like we are way behind where we need to (or could be). However, living costs are high. You can say we are currently house poor. In the downsizing we have used bridging finance and essentially all of our cash is locked up in bricks and mortar now - have no emergency fund as a result until the old house sells. The effect of the virus on the sale is being felt in little buyer's interest, although we are about to get a second inspection by prospective buyer in about three weeks of listing.

I worry that reading about people who are about to retire with $1m to $2m - that we'd never get there!

Any advice or words of wisdom would be great.
Based on your $83k annual income, your estimated Social Security benefits at age 66 will be about $2,400/month. If you are married at that time, the least that your spouse's benefits will be is 50% of that. Assuming that you are not, you would receive about $29k of SS benefits.

Do you expect your expenses to fall in retirement? Most retirees do because they are no longer paying for their children, their mortgage is often gone, they can move to a lower cost of living area, etc.

Let's assume that you'll need $70k of retirement income. SS benefits should cover about $29k of that, leaving you with the need for $41k more. Using the '4% rule of thumb', you would need about $1 million to provide that income.

You currently have $111k. Assuming an inflation-adjusted return of 4% and 27 years left before you reach full retirement age for SS, you need to save about $14.4k every year or about $1,200/month. That's almost exactly double what you're currently saving.

In order to achieve this, you'll have to reduce your spending, increase your income, or both. For many, reducing expenses is easier, but increasing income should not be ignored. Many move to their desired saving rate by increasing it by 1% per month until their saving rate is sufficiently high; this gives them time to adjust their spending accordingly. If you did this, you would get there in about nine months.

Since you're open to downsizing your property, there's a good chance that doing that alone will enable you to reach your desired saving rate.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Approaching 40, worried about financial future

Post by Beehave » Sun May 24, 2020 10:31 am

First and foremost: Focus on keeping your job skills up-to-date. Do not allow yourself to become a dinosaur. Be proactive in supporting (being involved in) changes your management makes or considers. Help with the planning. Help with documenting the new procedures in a way that optimizes operation of the new environment. Maintaining steady employment will serve you and your family very well, especially if there is either a significant downturn or a significant spike in inflation. In either case, your continued employment will be a much better performer than most investments, and you will be able to continue to make investments under the then-current-normal and you will catch up surprisingly well.

When your kids are old enough, your DW should consider some sort of employment, even if low-pay, part-time. Any boost is very helpful if you feel like you are just at some hump level of just making it. And in addition, that part-time may blossom into something more.

If college is a concern, consider community college as an option for the 1st two years if other opportunities will be to costly. I've studied and taught at top state universities and am retired and teach part-time at a community college now. The quality at the community college, if you are at all careful in selecting courses/instructors, is surprisingly good, and the class sizes are small which is an incredible value and advantage. Your children can then move into a fine state school or whatever next-step education with a solid background if they apply themselves.

Don't beat yourself up and don't worry. Tend your career like a precious garden and everything will fall into line over time. The odds are in your favor that your kids will understand the value of hard work and the value of earning a living and you may well find that your situation is actually a blessing.
I went through very similar situation as you and things ended up fine, especially for our children - - I hope and expect the same for you and your family.

Best wishes!

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WoodSpinner
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Re: Approaching 40, worried about financial future

Post by WoodSpinner » Sun May 24, 2020 11:10 am

toocold wrote:
Sat May 23, 2020 7:38 am
In the FIRE community, many believe it takes about 10 years to become "FI". The math is easy. Actions are more tough and it seems like you are starting out the journey, which usually begins when people have a similar realization. Mine came when I was 33 - my first was born, we just moved into a new house and we purchased a new car. You are in no way behind and I would advise not to compare yourself.

You may want to listen to the guys at ChooseFI podcast. It's free :)
+1 on ChooseFI! I like the energy, enthusiasm, and practical ideas.

FWIW, I think the advice on the BH is better and appreciate the forum format and moderation.

I see it as some natural synergies between the two groups.

WoodSpinner

smitcat
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Re: Approaching 40, worried about financial future

Post by smitcat » Sun May 24, 2020 11:32 am

JamesJonesJrJr wrote:
Sun May 24, 2020 9:46 am
I ran some numbers for you. On your current trajectory, I estimate you'll retire at age 75. Here's a link to the report I generated if you'd like to see the projection in detail.

One adjustment you could consider making is increasing your exposure to equities, especially considering your retirement date is still pretty far away. If you make this adjustment, I anticipate you could retire 5 years earlier at age 70. This assumes you've paid off your condo and can comfortably live on $50k after-tax in today's dollars.
The assumptions on SS do not make sense earning $83K today and having that many years of SS deductions across a couple would yield much more than that.

michaeljc70
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Re: Approaching 40, worried about financial future

Post by michaeljc70 » Sun May 24, 2020 11:35 am

JamesJonesJrJr wrote:
Sun May 24, 2020 9:46 am
I ran some numbers for you. On your current trajectory, I estimate you'll retire at age 75. Here's a link to the report I generated if you'd like to see the projection in detail.

One adjustment you could consider making is increasing your exposure to equities, especially considering your retirement date is still pretty far away. If you make this adjustment, I anticipate you could retire 5 years earlier at age 70. This assumes you've paid off your condo and can comfortably live on $50k after-tax in today's dollars.
I think he will get more than $20k SS at age 70. I also think a 3% real rate of return is on the low side. For the last 70 years the real return on stocks was around 7%. Even if you have an AA of 50/50 and the bonds return nothing that puts the real rate of return at 3.5%. Of course, no one knows what it will be over the next 70 years.

Another thing is their expenses should go down after the kids are grown up and they'll be able to save more.

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Re: Approaching 40, worried about financial future

Post by JamesJonesJrJr » Sun May 24, 2020 11:53 am

smitcat wrote:
Sun May 24, 2020 11:32 am
JamesJonesJrJr wrote:
Sun May 24, 2020 9:46 am
I ran some numbers for you. On your current trajectory, I estimate you'll retire at age 75. Here's a link to the report I generated if you'd like to see the projection in detail.

One adjustment you could consider making is increasing your exposure to equities, especially considering your retirement date is still pretty far away. If you make this adjustment, I anticipate you could retire 5 years earlier at age 70. This assumes you've paid off your condo and can comfortably live on $50k after-tax in today's dollars.
The assumptions on SS do not make sense earning $83K today and having that many years of SS deductions across a couple would yield much more than that.
I don't see you coming up with a number of your own so I'll take that as a tacit agreement that the assumption I made was simply a conservative one, which is what I intended.

JamesJonesJrJr
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Re: Approaching 40, worried about financial future

Post by JamesJonesJrJr » Sun May 24, 2020 12:07 pm

michaeljc70 wrote:
Sun May 24, 2020 11:35 am

I think he will get more than $20k SS at age 70.
Can you explain this a little further?
michaeljc70 wrote:
Sun May 24, 2020 11:35 am

I also think a 3% real rate of return is on the low side. For the last 70 years the real return on stocks was around 7%. Even if you have an AA of 50/50 and the bonds return nothing that puts the real rate of return at 3.5%.
His portfolio is 67/33 stocks/bonds. Have you considered the fact that inflation breakevens on bonds indicate negative real yields? And I don't know about you but I'm not betting on 7% real returns for stocks.
michaeljc70 wrote:
Sun May 24, 2020 11:35 am

Of course, no one knows what it will be over the next 70 years.
So you agree it makes sense to keep estimates conservative, no?
michaeljc70 wrote:
Sun May 24, 2020 11:35 am

Another thing is their expenses should go down after the kids are grown up and they'll be able to save more.
You can make equivalent counterpoints for why it would be difficult to save for retirement later on.

michaeljc70
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Re: Approaching 40, worried about financial future

Post by michaeljc70 » Sun May 24, 2020 12:17 pm

JamesJonesJrJr wrote:
Sun May 24, 2020 12:07 pm
michaeljc70 wrote:
Sun May 24, 2020 11:35 am

I think he will get more than $20k SS at age 70.
Can you explain this a little further?
Well, the SS calculator here https://www.ssa.gov/OACT/quickcalc/ gives $38k using his age/income and a retirement age of 70. So that is 90% more than what you used.

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onthecusp
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Re: Approaching 40, worried about financial future

Post by onthecusp » Sun May 24, 2020 12:24 pm

You should get that house sold as soon as possible. There is always a right price in every market. While I don't believe that it is good to under-price a house only to brag how it sold in a day, the right price is usually lower than you think. Since you have some interest in the past two weeks, but buyers are not beating down the door, you are pretty close and should make reasonable concessions to get the deal done.

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Re: Approaching 40, worried about financial future

Post by JamesJonesJrJr » Sun May 24, 2020 12:30 pm

michaeljc70 wrote:
Sun May 24, 2020 12:17 pm
JamesJonesJrJr wrote:
Sun May 24, 2020 12:07 pm
michaeljc70 wrote:
Sun May 24, 2020 11:35 am

I think he will get more than $20k SS at age 70.
Can you explain this a little further?
Well, the SS calculator here https://www.ssa.gov/OACT/quickcalc/ gives $38k using his age/income and a retirement age of 70. So that is 90% more than what you used.
You're right, maybe $20k is too conservative. You actually want to use the 'inflated' dollars option, which put his SS benefit at $102k. But you need to reduce it by 25% to account for the baseline scenario of benefit reduction in 2035, so $76k. This would move his retirement age up to 65 in the 67/33 scenario and 63 years old in the more aggressive scenario.
Last edited by JamesJonesJrJr on Sun May 24, 2020 12:34 pm, edited 1 time in total.

smitcat
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Re: Approaching 40, worried about financial future

Post by smitcat » Sun May 24, 2020 1:08 pm

michaeljc70 wrote:
Sun May 24, 2020 12:17 pm
JamesJonesJrJr wrote:
Sun May 24, 2020 12:07 pm
michaeljc70 wrote:
Sun May 24, 2020 11:35 am

I think he will get more than $20k SS at age 70.
Can you explain this a little further?
Well, the SS calculator here https://www.ssa.gov/OACT/quickcalc/ gives $38k using his age/income and a retirement age of 70. So that is 90% more than what you used.
Yes, agreed - that is what I figured as well. But what about his wife and the couples SS total?

smitcat
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Re: Approaching 40, worried about financial future

Post by smitcat » Sun May 24, 2020 1:10 pm

JamesJonesJrJr wrote:
Sun May 24, 2020 12:30 pm
michaeljc70 wrote:
Sun May 24, 2020 12:17 pm
JamesJonesJrJr wrote:
Sun May 24, 2020 12:07 pm
michaeljc70 wrote:
Sun May 24, 2020 11:35 am

I think he will get more than $20k SS at age 70.
Can you explain this a little further?
Well, the SS calculator here https://www.ssa.gov/OACT/quickcalc/ gives $38k using his age/income and a retirement age of 70. So that is 90% more than what you used.
You're right, maybe $20k is too conservative. You actually want to use the 'inflated' dollars option, which put his SS benefit at $102k. But you need to reduce it by 25% to account for the baseline scenario of benefit reduction in 2035, so $76k. This would move his retirement age up to 65 in the 67/33 scenario and 63 years old in the more aggressive scenario.
Why would you want to use inflated dollars for income when using non inflated dollars for expenses?

smitcat
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Re: Approaching 40, worried about financial future

Post by smitcat » Sun May 24, 2020 1:14 pm

JamesJonesJrJr wrote:
Sun May 24, 2020 11:53 am
smitcat wrote:
Sun May 24, 2020 11:32 am
JamesJonesJrJr wrote:
Sun May 24, 2020 9:46 am
I ran some numbers for you. On your current trajectory, I estimate you'll retire at age 75. Here's a link to the report I generated if you'd like to see the projection in detail.

One adjustment you could consider making is increasing your exposure to equities, especially considering your retirement date is still pretty far away. If you make this adjustment, I anticipate you could retire 5 years earlier at age 70. This assumes you've paid off your condo and can comfortably live on $50k after-tax in today's dollars.
The assumptions on SS do not make sense earning $83K today and having that many years of SS deductions across a couple would yield much more than that.
I don't see you coming up with a number of your own so I'll take that as a tacit agreement that the assumption I made was simply a conservative one, which is what I intended.
No, I do not view it as conservative it seems more like a random guess without taking any time to read his post and use the information supplied. When linking someone to a calculator that would appear to give a poster solid guidelines it would be best to warn them if the numbers are just guess's and not based on the posts data.

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