Gen-X Boglehead Thoughts

[Wannaretireearly]

Welcoming 2023 with, uh, open arms, and looking over our retirement planning tracker spreadsheet with a good bit of hope.

The only awesome thing I can contribute right now is this awesome video.

https://www.youtube.com/watch?v=CPBE6rNh8QA

(not sure I agree with #6. I know nobody in my age group that still rents)

Haha. I think I’ve found my tribe here too. Combined age 90 (why are we not retired yet )

[SantaClaraSurfer]

I jettisoned exactly these vintages of EEs in favor of 10 year MYGAs paying 5.5%

Now they are paying 5.2% but still attractive in my estimation

You are right. I found a MYGA online at 5.2% for $20,000 over 10 years, so I see what you are saying. Thank you for giving something for me to think about!

My back of the envelope is that there would be a FED + CA State tax event for us at MYGA maturity in 10 years. In comparison, the 2020-21 EE Bonds are tax deferred for a full 20 years and have no state income tax. Also, after 10 years an EE Bond has a YTM of 7.07%, so a MYGA rollover at 10 years would have to compete with that, or begin to fall behind. (See my breakdown here.)

I'd favor individually held TIPS to maturity with positive real yields now over EE bonds personally. Search for tips ladder or lmp for details. I'm a similar age (46) and decided to start buying some new issued 30 years TIPS.

I see what you are saying. Tax considerations (and our I Bonds holdings) lean me away from adding TIPS in lieu of EE Bonds, but I think I will need to learn more. Thank you!

(not sure I agree with #6. I know nobody in my age group that still rents)

I agree that living in a VHCOL area and getting a late start puts my wife and I in an atypical situation! What I am trying to convey is that the math can work out for Gen-X renters, as well. While there can be a large amount of societal and peer pressure to seeing buying a home as the only valid option, for us that would mean borrowing extensively to make a down payment on what we often consider to be ridiculously overpriced homes, or making multi-hour commutes and still not living somewhere that competes with a community in which we can afford to rent. Our rent as a percentage of gross income has been very reasonable, and allows us to maintain a high savings rate. Eventually the math for buying a home will favor us, and then it will just come down to personal preference.

Great post and sorry about your layoff. Lots to unpack, but it took me 15 years to roll over an old 401k that I was losing track of (non Fido or Vanguard). Anyhow, seems you are very well prepared for any speed bumps.

At your age (meant in a good way!) have you thought about early retiring or at least taking a longer break? Just curious

Thank you! I don't think about retiring. 1. My area of expertise and skills are relevant and my niche has plenty of peers in my same age range and older. I make a solid impact. 2. My wife is younger than me, and I will likely work in some capacity for as close to when she wants to retire as possible. Could that include a gear shift into something different for me? Sure! It's more of a joint decision for us...and, luckily for us, we do try to keep work and staying current in our skills fun.

[CletusCaddy]

I jettisoned exactly these vintages of EEs in favor of 10 year MYGAs paying 5.5%

Now they are paying 5.2% but still attractive in my estimation

You are right. I found a MYGA online at 5.2% for $20,000 over 10 years, so I see what you are saying. Thank you for giving something for me to think about!

My back of the envelope is that there would be a FED + CA State tax event for us at MYGA maturity in 10 years. In comparison, the 2020-21 EE Bonds are tax deferred for a full 20 years and have no state income tax. Also, after 10 years an EE Bond has a YTM of 7.07%, so a MYGA rollover at 10 years would have to compete with that, or begin to fall behind.

The 7% YTM on an EE bond in 10 years is not the right comparison for a decision that you are making right now.

Instead the question is, what would the second 10 year MYGA rate have to be to beat the EE by maturity?

In 10 years the 5.2% $20k MYGA will be worth $33,204.

Let’s say it needs to grow to $42,000 to compete with the EE worth $40,000 (CA tax exempt).

My math says the second 10 year MYGA would only need to pay 2.3%

Very good odds of that happening if you ask me

[SantaClaraSurfer]

In 10 years the 5.2% $20k MYGA will be worth $33,204.

Let’s say it needs to grow to $42,000 to compete with the EE worth $40,000 (CA tax exempt).

My math says the second 10 year MYGA would only need to pay 2.3%

Very good odds of that happening if you ask me

Again, back of envelope here, the tax event (during accumulation phase, so 36 + 9, or 45% marginal Fed+CA) at year 10 means my remaining MYGA principal would be $27,262 net (down from $33,204 before tax) in year ten**. That's going to bump the required interest on the 2nd 10 year MYGA up for me.

After tax, it's going to require a 3.664% return from the $27,262 remaining principal in the MYGA over the last 10 years arriving at around $39,070 gross in year 20, and $35,528 net after 30% Fed + State taxes to match the EE Bond net return in year 20. This assumes taxes of 24% Fed and 6% State in retirement.

Acknowledging there's a $10,000 annual limit on EE Bonds, keeping things apples to apples, the yield on $20,000 in EE Bonds net after Fed Tax of 24% in year 20 would also equal to $35,528.

Assuming I've got the calculation right, I think your case for MYGAs is strong and worthy of consideration, especially if I had an expense 10 years from now or was expecting a more favorable tax bracket in that time frame.

I see the biggest risk for me in securing the desired rate for the 2nd 10 years, as it's competing against the 20 year doubling of the EE Bond and it's not possible to know the Fixed Income environment ten years from now. Other considerations are that the MYGA also requires handling a tax event in year 10 [**if I don't roll it over], half way to the ladder date, and that it requires a lump sum minimum investment.

Thank you for giving me something to think about!

** IF I chose to not roll over the MYGA. I did not realize when I wrote this comment that MYGAs can be rolled over to continue their tax deferred status. CletusCaddy corrected me below. My math is only relevant if I chose NOT to roll over the MYGA at year 10.

[CletusCaddy]

In 10 years the 5.2% $20k MYGA will be worth $33,204.

Let’s say it needs to grow to $42,000 to compete with the EE worth $40,000 (CA tax exempt).

My math says the second 10 year MYGA would only need to pay 2.3%

Very good odds of that happening if you ask me

Again, back of envelope here, the tax event (during accumulation phase, so 36 + 9, or 45% marginal Fed+CA) at year 10 means my remaining MYGA principal would be $27,262 net (down from $33,204 before tax) in year ten. That's going to bump the required interest on the 2nd 10 year MYGA up for me.

After tax, it's going to require a 3.664% return from the $27,262 remaining principal in the MYGA over the last 10 years arriving at around $39,070 gross in year 20, and $35,528 net after 30% Fed + State taxes to match the EE Bond net return in year 20. This assumes taxes of 24% Fed and 6% State in retirement.

Acknowledging there's a $10,000 annual limit on EE Bonds, keeping things apples to apples, the yield on $20,000 in EE Bonds net after Fed Tax of 24% in year 20 would also equal to $35,528.

Assuming I've got the calculation right, I think your case for MYGAs is strong and worthy of consideration, especially if I had an expense 10 years from now or was expecting a more favorable tax bracket in that time frame.

I see the biggest risk for me in securing the desired rate for the 2nd 10 years, as it's competing against the 20 year doubling of the EE Bond and it's not possible to know the Fixed Income environment ten years from now. Other considerations are that the MYGA also requires handling a tax event in year 10, half way to the ladder date, and that it requires a lump sum minimum investment.

Thank you for giving me something to think about!

But you are not forced to pay tax on the first MYGA if you roll it over into a second MYGA. Not sure what you mean by “tax event”

[SantaClaraSurfer]

In 10 years the 5.2% $20k MYGA will be worth $33,204.

Let’s say it needs to grow to $42,000 to compete with the EE worth $40,000 (CA tax exempt).

My math says the second 10 year MYGA would only need to pay 2.3%

Very good odds of that happening if you ask me

Again, back of envelope here, the tax event (during accumulation phase, so 36 + 9, or 45% marginal Fed+CA) at year 10 means my remaining MYGA principal would be $27,262 net (down from $33,204 before tax) in year ten. That's going to bump the required interest on the 2nd 10 year MYGA up for me.

After tax, it's going to require a 3.664% return from the $27,262 remaining principal in the MYGA over the last 10 years arriving at around $39,070 gross in year 20, and $35,528 net after 30% Fed + State taxes to match the EE Bond net return in year 20. This assumes taxes of 24% Fed and 6% State in retirement.

Acknowledging there's a $10,000 annual limit on EE Bonds, keeping things apples to apples, the yield on $20,000 in EE Bonds net after Fed Tax of 24% in year 20 would also equal to $35,528.

Assuming I've got the calculation right, I think your case for MYGAs is strong and worthy of consideration, especially if I had an expense 10 years from now or was expecting a more favorable tax bracket in that time frame.

I see the biggest risk for me in securing the desired rate for the 2nd 10 years, as it's competing against the 20 year doubling of the EE Bond and it's not possible to know the Fixed Income environment ten years from now. Other considerations are that the MYGA also requires handling a tax event in year 10, half way to the ladder date, and that it requires a lump sum minimum investment.

Thank you for giving me something to think about!

But you are not forced to pay tax on the first MYGA if you roll it over into a second MYGA. Not sure what you mean by “tax event”

Ok, got it! I did not know about that option.

But then it sounds like if I'm planning to build a 20 year ladder, I would have to roll my 10 year proceeds into a new MYGA or pay the taxes due. Is that correct?

So what you're saying above is that you think it's likely you'd be able to roll your 10 Year MYGA into a MYGA paying 2.3% or better?

[CletusCaddy]

In 10 years the 5.2% $20k MYGA will be worth $33,204.

Let’s say it needs to grow to $42,000 to compete with the EE worth $40,000 (CA tax exempt).

My math says the second 10 year MYGA would only need to pay 2.3%

Very good odds of that happening if you ask me

Again, back of envelope here, the tax event (during accumulation phase, so 36 + 9, or 45% marginal Fed+CA) at year 10 means my remaining MYGA principal would be $27,262 net (down from $33,204 before tax) in year ten. That's going to bump the required interest on the 2nd 10 year MYGA up for me.

After tax, it's going to require a 3.664% return from the $27,262 remaining principal in the MYGA over the last 10 years arriving at around $39,070 gross in year 20, and $35,528 net after 30% Fed + State taxes to match the EE Bond net return in year 20. This assumes taxes of 24% Fed and 6% State in retirement.

Acknowledging there's a $10,000 annual limit on EE Bonds, keeping things apples to apples, the yield on $20,000 in EE Bonds net after Fed Tax of 24% in year 20 would also equal to $35,528.

Assuming I've got the calculation right, I think your case for MYGAs is strong and worthy of consideration, especially if I had an expense 10 years from now or was expecting a more favorable tax bracket in that time frame.

I see the biggest risk for me in securing the desired rate for the 2nd 10 years, as it's competing against the 20 year doubling of the EE Bond and it's not possible to know the Fixed Income environment ten years from now. Other considerations are that the MYGA also requires handling a tax event in year 10, half way to the ladder date, and that it requires a lump sum minimum investment.

Thank you for giving me something to think about!

But you are not forced to pay tax on the first MYGA if you roll it over into a second MYGA. Not sure what you mean by “tax event”

Ok, got it! I did not know about that option.

But then it sounds like if I'm planning to build a 20 year ladder, I would have to roll my 10 year proceeds into a new MYGA or pay the taxes due. Is that correct?

So what you're saying above is that you think it's likely you'd be able to roll your 10 Year MYGA into a MYGA paying 2.3% or better?

That’s exactly what I’m saying

[Colorado14]

I recently retired at age 54, as planned. Spouse is already retired. So far retirement has been wonderful.

It's a real treat to be able to enjoy having free time, less stress and much contentment knowing that we worked and saved so much in our twenties and thirties (and forties) that we can now enjoy this chapter of our lives. Hopefully all of you Gen Xers that want to join us in early retirement will be able to do so soon! Good luck!

[MrBobcat]

I recently retired at age 54, as planned. Spouse is already retired. So far retirement has been wonderful.

It's a real treat to be able to enjoy having free time, less stress and much contentment knowing that we worked and saved so much in our twenties and thirties (and forties) that we can now enjoy this chapter of our lives. Hopefully all of you Gen Xers that want to join us in early retirement will be able to do so soon! Good luck!

Congrats, were shooting for an earlyish retirement (we're 56/57) in about 3.5 years.

[hppycamper]

I recently retired at age 54, as planned. Spouse is already retired. So far retirement has been wonderful.

It's a real treat to be able to enjoy having free time, less stress and much contentment knowing that we worked and saved so much in our twenties and thirties (and forties) that we can now enjoy this chapter of our lives. Hopefully all of you Gen Xers that want to join us in early retirement will be able to do so soon! Good luck!

Congratulations! Plan to retire in about 2 years when I turn 55. Waiting till 55 so that I will have retiree medical insurance coverage till Medicare kicks in.

[Colorado14]

I recently retired at age 54, as planned. Spouse is already retired. So far retirement has been wonderful.

It's a real treat to be able to enjoy having free time, less stress and much contentment knowing that we worked and saved so much in our twenties and thirties (and forties) that we can now enjoy this chapter of our lives. Hopefully all of you Gen Xers that want to join us in early retirement will be able to do so soon! Good luck!

Congrats, were shooting for an earlyish retirement (we're 56/57) in about 3.5 years.

Congrats to you too! Stay the course and tune out the noise regarding "the sky is falling." Those 3 and a 1/2 years will go by very quickly, although some days it may not feel that way...

[Colorado14]

I recently retired at age 54, as planned. Spouse is already retired. So far retirement has been wonderful.

It's a real treat to be able to enjoy having free time, less stress and much contentment knowing that we worked and saved so much in our twenties and thirties (and forties) that we can now enjoy this chapter of our lives. Hopefully all of you Gen Xers that want to join us in early retirement will be able to do so soon! Good luck!

Congratulations! Plan to retire in about 2 years when I turn 55. Waiting till 55 so that I will have retiree medical insurance coverage till Medicare kicks in.

Congrats to you too! Those 2 years will go by so very quickly! Retiree medical care is certainly a gift (that you've earned!) That's a fantastic benefit that will serve you well from 55 to 65. Well done.

[AnnetteLouisan]

The Barry Manilow song, “Looks like we made it,” is coming to mind, but not in the usual bad way. Congrats, fellow Xers!

[luminous]

(not sure I agree with #6. I know nobody in my age group that still rents)

I agree that living in a VHCOL area and getting a late start puts my wife and I in an atypical situation! What I am trying to convey is that the math can work out for Gen-X renters, as well. While there can be a large amount of societal and peer pressure to seeing buying a home as the only valid option, for us that would mean borrowing extensively to make a down payment on what we often consider to be ridiculously overpriced homes, or making multi-hour commutes and still not living somewhere that competes with a community in which we can afford to rent. Our rent as a percentage of gross income has been very reasonable, and allows us to maintain a high savings rate. Eventually the math for buying a home will favor us, and then it will just come down to personal preference.

Wanted to chime in as another Gen-X renter in a VHCOL area. By the time our earning power allowed us to even consider buying in our city, our rent control was already so advantageous that it felt ludicrous to even consider buying. We’d have been paying 2-3x our rent in PITI, and while we could suddenly afford that it was not the decision for us.

The societal pressure to buy is huge, and I was deeply sad for years that we couldn’t buy. So when we had the ability to buy but chose not to it took a while to get used to that feeling!

Thankfully we dutifully saved and invested, and keeping our cost of living relatively low has allowed me to take a step back from full time work, spend more time with our children while they are at home, and enjoy my hobbies. If we had bought I wouldn’t be able to do that, even if on paper we would end up with a higher net worth eventually.

Rent control is not something everyone has access to, but many VHCOL cities have some version of it to allow long term renters the kind of price stability that homeowners have. It has worked out for us.

[Visitor76]

As a Gen X Bicentennial Baby I'll join the discussion. I'm a late bloomer to the financial readiness journey.

My 401a, 457b, and 401h through my government employer are all sitting in an S&P500 index fund and I plan to keep them there until I reach my estimated retirement at 55.

My wife is higher up on the Gen X scale (born early 70s) and has been going through a career change over the past 5 years with getting her degree and certification.

We're late to the parenting game as our oldest will be entering high school when I retire and youngest will still be in middle school. Given our age, my wife and I are concentrating on maxing out our retirement fund so as to not be a financial burden on our children later on. We'll guide them to an in-state college or university, and to pursue a value degree.

We own our home on a fixed 2.8% rate, but plan on having it paid off before I retire.

Our short-term investments are made up of taxable accounts in low-risk funds. I plan to dip my toe back in VTSAX once the Fed pivots and begins to cut rates. My wife is more risk-adverse and prefers to keep her money in the bank.

[NiceUnparticularMan]

I recently retired at age 54, as planned. Spouse is already retired. So far retirement has been wonderful.

It's a real treat to be able to enjoy having free time, less stress and much contentment knowing that we worked and saved so much in our twenties and thirties (and forties) that we can now enjoy this chapter of our lives. Hopefully all of you Gen Xers that want to join us in early retirement will be able to do so soon! Good luck!

Now I just need you to talk to my spouse so you can convince her we should be pulling the rip cord.

We actually got a relatively late start/even later finish on kids, so both of ours are still at home (one in 11th grade, and one still only in 5th grade), which is the one major impediment to not retiring immediately.

I think we will definitely wait for #1 to go to college, but then it is a loooooooong haul from there until #2 would go. So I for one am lobbying not to wait that long, but then the question becomes exactly when . . . .

[Lextalionis]

As a Gen-Xer myself, most of my investments are tied up in collectible G.I. Joe action figures (with Kung-Fu grip!)

Knowing is half the battle.

[MCR]

As a Gen X-er (born in 1971) I love this thread. Was talking with my wife (born 1972) last night about the similarities and differences among Gen X-ers, particularly the impact of having children earlier or later (we're on the earlier side -- our youngest of 3 children is 17 and about to head off to college).

I was also reminded of Morgan Housel's book, The Psychology of Money. Our experiences of investing as Gen-Xers are different than those ahead of us (Boomers) and those behind us (Millennial and Gen Z). Market conditions were different based upon when Gen X-ers started investing (generally) and the tools available to us (e.g. 401K, IRAs, ETFs, discount brokerages, online access, etc.) were different (and/or arrived in the nick of time). (I also note there were also tools NOT available to us, like Robinhood.) This is also the first thread I've seen on BH where mention of international allocation didn't create a raging debate!

[Colorado14]

I recently retired at age 54, as planned. Spouse is already retired. So far retirement has been wonderful.

It's a real treat to be able to enjoy having free time, less stress and much contentment knowing that we worked and saved so much in our twenties and thirties (and forties) that we can now enjoy this chapter of our lives. Hopefully all of you Gen Xers that want to join us in early retirement will be able to do so soon! Good luck!

Now I just need you to talk to my spouse so you can convince her we should be pulling the rip cord.

We actually got a relatively late start/even later finish on kids, so both of ours are still at home (one in 11th grade, and one still only in 5th grade), which is the one major impediment to not retiring immediately.

I think we will definitely wait for #1 to go to college, but then it is a loooooooong haul from there until #2 would go. So I for one am lobbying not to wait that long, but then the question becomes exactly when . . . .

I can be very convincing, so would be happy to chat with your spouse.

Waiting for #1 to go to college seems reasonable. Answering the "when" question is not always clear cut, to be sure. My/our decision was based on answers to the "How do we want to spend our time?" question; the answer to that will likely differ if #2 is still in school vs. graduated. So many consider the "when" question in terms of what you would envision your life to be like if you retired with #2 in school vs. not in school.

Good luck!

[NiceUnparticularMan]

Answering the "when" question is not always clear cut, to be sure. My/our decision was based on answers to the "How do we want to spend our time?" question; the answer to that will likely differ if #2 is still in school vs. graduated. So many consider the "when" question in terms of what you would envision your life to be like if you retired with #2 in school vs. not in school.

Good luck!

Thank you!

I think part of the challenge for us is truly envisioning just that--what exactly would it look like if we were retired but our second was still living at home and going to school? Not in a bad way, but part of that challenge is we are currently both still mostly working from home, which at least somewhat closes the gap in terms of likely daily routines.

I think when the first child is off to college, we might start getting at least a bit more clarity on how that might work. But so far, I think I am a bit more excited about what we could do with our days together, including taking more long walks, visiting museums and such, even short day trips . . . we'll see how it unfolds.

[Wannaretireearly]

Answering the "when" question is not always clear cut, to be sure. My/our decision was based on answers to the "How do we want to spend our time?" question; the answer to that will likely differ if #2 is still in school vs. graduated. So many consider the "when" question in terms of what you would envision your life to be like if you retired with #2 in school vs. not in school.

Good luck!

Thank you!

I think part of the challenge for us is truly envisioning just that--what exactly would it look like if we were retired but our second was still living at home and going to school? Not in a bad way, but part of that challenge is we are currently both still mostly working from home, which at least somewhat closes the gap in terms of likely daily routines.

I think when the first child is off to college, we might start getting at least a bit more clarity on how that might work. But so far, I think I am a bit more excited about what we could do with our days together, including taking more long walks, visiting museums and such, even short day trips . . . we'll see how it unfolds.

Great conversation. DW and I have similar discussions and the key milestones of kids going to college. Very similar, dw has first kid going to college as a major milestone along with her turning 50 that year. Second kid will go to college in 6 years time and roughly on my 50th year. Major milestones given how much of our life’s revolve around kids, school and their activities.

I see my old boss retired and enjoying life with his DW. Skiing, boating, whatever. I just want that even for 6-12 months. Perhaps we pickup fun jobs after that, perhaps not. I’m lucky my job/grind is not too bad, but still I have little enthusiasm for the w*rk.

Really nice to hear from others in very similar boats.